Good day, and thank you for standing by. Welcome to the Veracyte Fourth Quarter and Full Year 2023 Financial Results Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to pass the call over to the Senior Director of Investor Relations, Shayla Gorman. Please go ahead.

Good afternoon, everyone, and thanks for joining us today for a discussion of our fourth quarter and full year 2023 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer; and Rebecca Chambers, our Chief Financial Officer. Veracyte issued a press release earlier this afternoon detailing our fourth quarter and full year 2023 financial results. This release, along with the business and financial presentation is available in the Investor Relations section of our website at veracyte.com. Before we begin, I'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance they will prove to be correct. Further, we are not under any obligation to provide further updates on our business trends or our performance during the quarter. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including Veracyte's most recent forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release accessible from the IR section of Veracyte's website. I will now turn the call over to Marc Stapley, Veracyte's CEO.

Thanks, Shayla, and thanks everyone for joining us today. I'm pleased to share that 2023 was a record year for Veracyte. Our high value tests improved care for more than 125,000 patients and their physicians, enabling better diagnosis, prognosis and treatment decisions. I'd like to thank the entire Veracyte team for their hard work and dedication to our mission of transforming cancer care. Over the course of 2023, we grew revenue 22% and generated $44 million in cash from operations to deliver our second consecutive year of positive cash flow. This is a significant proof point that our philosophy to drive cash generation, while investing in our strategic growth drivers is paying off, and we expect to achieve positive cash flow going forward. I am extremely proud of our strong financial profile, allowing us to further expand the impact we are having on patients' lives. Our successes attribute attributable not only to the dedication of our employees to our mission, but also to the Veracyte diagnostics platform, which refers to our unique approach to launching and driving adoption for our diagnostic tests. This is driven by broad sets of genomic and clinical data deep bioinformatic and AI capabilities, a powerful evidence generation engine, which ultimately drives guideline inclusion and durable reimbursement for our tests as well as proven commercial excellence. The platform creates a flywheel for the generation of novel insights that in turn drive innovation and pipeline development toward future test expansion in a way that is extensible and repeatable across multiple indications. Decipher prostrate continues to be a clear example of this platform in action, over the course of 2023 we added eight publications and 16 abstracts to the clinical evidence library for Decipher Prostate, and then additional 12 abstracts and seven publications from our Research Use Only…

Thanks, Marc. Q4 was another record quarter with $98.2 million in revenue, an increase of 22% over the prior year, higher than our pre-announcement due to the finalization of cash collections which benefited ASP. We grew total volume to approximately 34,000 tests, a 21% increase over the same period in 2022. Testing revenue during the quarter was $90.4 million, an increase of 29% year-over-year, driven by higher than expected Afirma volume, Decipher growth and strong prior period cash collections. Total testing volume was approximately 31,000 tests. Testing ASP was approximately $2900 as we've resolved and collected over $4 million of out-of-period payments. Adjusting for this impact, testing ASP would have been approximately $2750. Fourth quarter product volume was approximately 2600 tests and product revenue was $3.7 million, up 13% year-over-year as the team did a tremendous job eliminating the patient impact of the supplier issues Marc mentioned. Biopharmaceutical and other revenue was $4.1 million in line with our expectations and down 39% year-over-year, given overall spending constraints across the industry. Moving to gross margin and operating expenses, I will highlight non-GAAP results which exclude the amortization of acquired intangible assets, other acquisition related expenses and restructuring costs but does include routine stock-based compensation. Non-GAAP gross margin was 70%, up approximately 340 basis points compared to the prior year. Testing gross margin was 73%, up 90 basis points compared to the prior year, benefiting from higher lead volume and over $4 million of out-of-period collections. Product gross margin was 52%. Biopharmaceutical and other gross margin was 15%, down year-over-year due to lower fixed cost absorption. Non-GAAP operating expenses excluding cost of revenue were up 28% year-over-year at $65.6 million including $3.5 million technology access fee to develop or IVD kitted tests on the NextSeq Dx NGS platform. Research and development expenses…

Thank you. [Operator Instructions] One moment for our first question, please and it comes from the line Sung Ji Nam with Scotiabank. Please proceed.

Hi. Thanks for taking the questions and congratulations on the quarter and a great year. Maybe just kind of kick off with the Turk promoter mutation capability that's part of Afirma. Could you give us a sense of kind of what percentage of the volume you know that would actually be useful for that particular testing of the Afirma volume?

Yes Sung, thanks. Thanks very much for your kind comments and certainly a great year. On turn itself. It's a very rare -- relatively rare condition. And so the percentage of patients that actually show up with that mutation is quite small. Having said that, it's very, it's proving to be extremely useful to order that test on a certainly a larger number of the cases. I don't actually know we've got the percentage to that. We're currently seeing. I don’t know if you have with you.

Yes, I believe it's an ordered approximately 20% of the time where we have a positive result with Afirma on. But the actual percentage that has a mutation and my recollection is more in the single digit type range. But so that just gives you a sense of how frequently it is being ordered and how frequently it is being seen. I think importantly also Turk is alternative a competitive differentiator for us with regard and we aren't necessarily seeing an ASP uplift from Turk because it is not something we necessarily have coverage for, but it's more to Marc's point, it's more about the overall clinical contribution of having the assay than it is about a financial contribution to the Company. It's more about the patient benefit.

And one of the ways, I really think about how having that capabilities has helped or for the CDMO business from clearly given our healthy. Another reason to go and engage with our customers. It's enhanced our test relative to both the competitive landscape and also where we think ultimately guidelines can go. And so we always felt compelled to include that as part of the iPhone.

And Sung Ji, I apologize. I said 20% and it was that it's actually more like a third.

Okay. Wow. Okay, fantastic. Super helpful. And then my follow-up is just on you mentioned the C2i. The first indication is going to be in the muscle-invasive bladder cancer. And could you just remind us about Decipher bladder at the genomic classifier and kind of how does that kind of go hand-in-hand with your MRD offering where the plans for the MRD offering is there? Do you think there could be synergies there? Or just kind of how should we think about the Decipher bladder platform?

Yes. I mean, there are always going to be synergies whenever we can continue to increase the menu of offerings and tests that we have in the urology space. The as you know a few years ago, we launched the bladder test. It's more of a sub-typing test to help potentially determine a course of treatment. But what we read and it had relatively low penetration and we didn't particularly drive that commercially. One of the reasons being is what was the same call point it is a completely new product, if you think about it like that. And so yes we do not want to distract never wanted to distract from the benefit of that we're seeing in Decipher Prostate some, but the clinical utility is ultimately what matters. And we're continuing to develop that test further and think of ways of enhancing that utility. And but we've really refocused our energy now in bladder on the MRD test at this point on we think that the market opportunity for our own muscle-invasive bladder cancer test in MRT which has a clear path to reimbursement is greater. And yeah we're going to launch a test in the first half of 2026. And so that's what you're going to see our investments in both R&D and development activities, and ultimately in our commercial activities as we put that that test in the in the hands of the existing urology sales force on. But beyond that, one thing you'll continue to see us, do is yes and we talked about this quite a bit before. Is that work across the patient care continuum. And so as we can come up with other helpful diagnostic tests that have utility in either reducing unnecessary procedures or accelerating treatment some are predicting the performance of surgery of therapeutic actions will continue to do that. Tom, continue to consider it an important part of the urology roadmap.

Got it. Great. Thank you so much. I'll get back into queue.

Thank you. One moment for our next question, please. It comes from the line of Tejas Savant with Morgan Stanley. Please proceed.

Hello. This is Yuko on the call for Tejas. Thank you for taking our questions. I wanted to ask couple of questions on C2i MRD assay. What remains to be done prior to launch in first half 2026. What are the gaiting factors there and is there any lever to pull forward the launch time line?

Sure. Thanks for that. Yeah, does it quite a few steps that we need to go through here. One of course is the integration of C2i which is very much in progress at this point. And that team is now part of the Veracyte team and then the other systems and other integration activities will continue through the early part of this year. And then this the launch of the product program itself the muscle-invasive bladder test which is entering into our normal product development process and that's kicking off now that the team is part of Veracyte, and then we're going to have to continue to run samples on that test to further validate the tests and then do the tech assessment that we need to go through in order to get reimbursement. And then there's a period of waiting for a response on that as well. So quite a few different steps, steps that we have quite a lot of experience in following and I've been through a number of times before to your question on is there a way to pull it forward, if there was we will -- if there is we will we've provided a time line that we feel comfortable with given all those steps. But along the way if there's any opportunity to go faster I think you can rest assured that the team is looking for it and because that's a conversation, we talk about a lot. So and that's what we are right now, but no change in the plan of record first half of 2026?

Thank you for that And then wanted to also ask for how many genomes – have C2i sequence today and as you think about volumes ramping, you will be generating significant amount of data. How are you thinking about monetizing the dataset over time?

Yes. So, good question. I don't actually have the number in front of me, but it's significant. C2i has been I've been doing this for a number of years, five years or so. And as you've seen from a lot of their publications, they looked at a number of different indications, Bladder being one of them. And in each of those indications, they've got a significant amount of whole-genome data on. In terms of monetizing that data, I think of it very much in the same way as I think about the overall Veracyte diagnostics platform. And we've been whole transcriptome in endocrinology, in pulmonology and urology for a while. And C2i has been generating whole genomes. And so we now have a incredibly rich dataset available to us. And we can of course get in interest from Biopharma and expect to continue in the future. And I think particularly with MRD as an asset, that continues to grow that's not our primary focus. Our primary focus is very much on our diagnostics pathway, but opportunistically as we have a contact with Biopharma who are interested in any of that dataset I've described, we'll follow up on those opportunities. We clearly have some in the pipeline right now. We've had some in the past, and we'll continue to explore that.

And you can then you can imagine a scenario where in the future the C2i MRD assay at very similarly to decipher grid and a pharma grid where we are continuously generating clinical utility and other studies, which broaden our potential indication expansion and therefore, also subsequently help our commercialization efforts and managed care efforts. And so, I absolutely agree with Mark on. But effectively when it comes down to the diagnostic platform, we have described this kind of whole act approach whether it's whole-transcriptome or whole-genome really does allow us to monetize on monetize these markets more quickly and get a stickier response given the differentiated approach we've taken here. So, just add that to Mark's commentary. I think there's a couple of different ways, we could see this play out both of which are obviously quite positive.

Thank you very much.

Thank you. one moment for our next question, please. Its coming from Mason Carrico with Stephens. Please proceed. Q – Unidentified Analyst: Hi. Thanks for taking our questions. This is Jacob [ph] on for Mason. So maybe just starting with your guide, could you just help us think through what's embedded in your guidance for 2024? And maybe more specifically, what are those puts and takes that could play out in 2024 that gets you to the high end versus low end of your guide, with respect to Afirma and Decipher growth. I know you said, you're expecting testing and product revenue go 13% to 15% but maybe just breaking that out a little bit more and giving us more color would be helpful.

Yes, happy to. And so you're absolutely, correct. We're expecting testing and product revenue growth to be 13% to 15% thereby, absorbing a good portion of the Biopharma decline of approximately 50%. When you break down Afirma and Decipher where you know I think the easiest way to think about it is they're at very different life stages of their life -- they're very different stages of their lifecycle. And as a result, as well as the comp on the Afirma side obviously, when it comes down to it, the Decipher growth will be higher than the average of the two. And Afirma will be bringing -- will be below the average of the two. We're not going to get into the expectation to a point range at this point in time. But I think the most important thing to know is, we are very confident in our ability to penetrate both of these markets up to the 80% level. And while we are -- have significant out-of-period headwind from prior periods -- significant. I can't give out. We have significant prior period collections as a headwind. Third time's a charm. We are -- we are still very confident in the growth and overall trends of both of these products. I think importantly, and I mentioned this in the prepared remarks for the first quarter, we do expect a slight -- difference between the two in seasonality and that is worth noting. On the Afirma side, we have we have seen we saw obviously quite a strong fourth quarter. And so we are expecting it to be sequentially down quarter for Afirma maybe even a little more than we had seen in prior years given some of the weather impacts so far year-to-date and Decipher we are expecting to grow. And so just a little bit more guide -- more color into the Q1 guide, I think perhaps that could also be helpful.

Got it. Thank you. That's helpful. And then on I guess just on Decipher Prostate and more specifically on what are you seeing in terms of competition in the prostate market? Have you started to see any shift in competitive dynamics? And do you still feel like you're taking share? And I guess you guys noted that 35% penetrated in the market right now with potential to reach up to 80%. How much of that is kind of dependent on this MolDX XLCD coming through at the end of this year and into next year?

I mean to cover the second part, Steven. Obviously, not a not a great deal on that is as I mentioned about 30,000 patients a year or so certainly very important. It would be great to get that LCD from the patient outcomes perspective to be able to benefit from the Decipher test in that way. But really the -- if I think about it, the most important thing we're focused on is how we continue to drive Decipher Prostate and gain that market share. And more importantly as well are also to penetrate more of the market as we do that because honestly at this point with so many patients who have prostate cancer is still not getting our test or any other tests. I think that that's definitely a concern from the patient perspective. So, with the level of publications that we've seen for Decipher that we've generated not to mention all of the clinical and research publications that I referenced today in the prepared remarks plus the NCCN Level one guideline, the vast array of experience that people have not just in the U.S., but globally with Decipher we're doing everything that we can in order to drive further penetration and continue to be the market leader. So, I we haven't seen -- I wouldn't say there's any change in competitive dynamics one way or the other. We're very focused on what we can do to have the most effective test. And then beyond the U.S., those are all U.S. related comments and U.S. market shares. But beyond the U.S., there's so much KOL experience outside of the U.S. in terms of experience with studies involving Decipher, we feel there's a pent-up demand for that. So, as soon as we can get our Decipher product launched on PCR which we are planning to do in end of 2025, I think are our expectations for the adoption now are a little bit more optimistic than they otherwise would be had we have to go and create a market from now or level of interest from scratch. And so lots of excitement on our side for Decipher going forward.

Next question comes from the line of Dustin Scaringe with William Blair. Please proceed.

Hi everyone. Good afternoon and thanks for taking our questions. First here on nasal swab, you guys published validation data in December. Just wondering if you could talk about the feedback you've received on that since publication? And then as a follow-up to that how are you thinking about the TAM here? And given this was validated on individuals that had some sort of smoking history?

Yes. Great questions. So, the data that we ended up publishing or getting published in CHEST in December is data which had previously actually a couple of years ago. So getting into a final publication I think is an outstanding outcome. And I congratulate our entire team and others that we worked with on that publication. And it's great to finally see it out there. In terms of level of interest, I think that publication really does a couple of things for us. One is it helps us to really commence those reimbursement conversations and start to get ahead of that. We now have a peer-review publication in hand to do that. It also helps us have conversations with potential partners and others who might want to do some work with nasal swab in the future. So, very excited about that. But really where I had kind of hang my greatest sense of -- the level of interest in nasal swab so far is in NIGHTINGALE because as I mentioned on the call we are close to 100 sites enrolling. The level of interest in those sites, so if you think about what it takes from a clinical operations standpoint to identify gain interest from contracts sign up initiate and then commence enrolling a nearly 100 sites, it's significant. And it can only come from those investigators and those institutions being excited about the prospect of the test itself and being a part of that clinical utility study. So that to me I think is so far of one of our greatest indicators of interest in nasal swab and we're excited to see how that goes and certainly have a desire to see the clinical utility come out of that study.

Understood. Just staying on that topic.

So, yeah – I am sorry, you did asked – I am sorry, you asked about the market size the TAM and smoking history.

Yes.

I should cover that. Yes just to come to be very clear. I mean nasal swab is based on smoking patients who have a smoking history and it really measures the damage to the epithelial airway. One of one cause of that damage is of course smoking. ACE to expand the TAM beyond that would require a study that includes non-smokers and that is not the biggest market we're looking at. By far the largest market is those patients who are eligible for lung cancer screening and those who have lung nodules incidentally found which are 15 million and 1.6 million, respectively. That by far is the biggest market. And a significant proportion of those are current or former smokers and would fit the eligibility criteria for nasal swab. A next step in the future could very well be trying to expand that TAM by doing the necessary studies you know outside of non-smoking. We just don't know whether that figure until you've done the study. You don't know whether that strategy produces the same results or not. But by far we focused the product initially on the largest proportion of the market.

Understood. Thank you for that. And switching over to Afirma. Just wondering if we should be thinking about any reimbursement dynamics for that test in 2024? And then any considerations longer-term about pricing for this product? Thank you.

Yes, I'm happy to take that. And so Afirma I mean if you rewind the clock back to 2021 with the code change on we did see the impact in 2022 of that. And then over the course of 2023 we did see obviously the benefit of resolution of many of those the impact of 2021 and 2022 tied to the code change. And so the reason why I go back throughout all of that history is you know the ASP for Afirma at this point in time based on those resolutions is quite elevated. And so I think when it comes down to it today we're in a great position. Our goal is to maintain that position we see no reason why we can't continue to do so. We had some smaller managed care wins over the course of the back half of last year that really that really help us help us be confident that we'll be able to maintain ASP plus or minus a bit as we see any given quarter. So I think on the Afirma side not any big on -- not any big dynamics to think through from a payment reset perspective that doesn't come to bear until 2028 as well. So we feel great about the work the team has done both on the managed care and the billing side and collection side. And I think we're going to be obviously quite focused about that going forward. Over the course of I think also it's worth highlighting on the Decipher side, obviously less of a dynamic with a code change like we had on Afirma, but I think a different portion of the story given it's more nascent in its coverage and contract contracted lives. And so we do have a very good story on the on the Decipher ASP. We've gotten a number of wins over the course of 2023 and we're hopeful we'll have some more over the course of 2024 and 2025 and so on we're obviously we're obviously hoping that we can continue to progress the coverage for Decipher given effectively the level one status that it has in the publication and clinical support of ours.

Appreciate all the color there . Thank you. \

Thank you. One moment for our next question. Comes from the line of Matt Sykes with Goldman Sachs. Please proceed.

Hey, guys congrats on the quarter. Thanks for taking the question. Is there any way to quantify how much benefit you see from your established commercial infrastructure with Decipher prostrate and how much can be applied in your bladder MRD test?

Yes it's a great question. I mean the urology the leverage that we're getting out of our urology sales force in prostate alone has been very significant. And I think you see that in the numbers. We added less than a handful of net total reps in last year. And you can see the significant growth that we got out of Decipher. One of the reasons, we think there's a lot of reasons why we actually think an MRD based test in bladder is the right test for us not to mention the cohort that we've got the work that's been done already, but really importantly is leveraging that urology sales force again and it goes back to the comments we made. And I think it was in response to the first question. The benefit of having more and more menu available for our reps as they go out and they got this fantastic relationships with the urologists from large group practices all the way down to the community being able to offer the patients who are dealing with bladder cancer, which is a terrible prognosis in many cases and having something to offer and to enable to determine whether or not their treatment has been and has been, or is being effective, it will be incredibly meaningful. So we do think we'll be able to leverage the existing sales force that we have and will have at that time without having to grow it substantially, while it might be within a practice that might be though a dozen urologists and maybe one of them specializes in bladder cancer. And so you might you might find that it's a different sell. It's a different product sold to a specific specialty within their practice. The reality is we have incredible access to those practices in general. And so we don't anticipate a great deal of extra investment required in order to sell our test in total.

Agreed. And I would just add one more thing on, obviously, the Decipher franchise extends into the revenue cycle management and client services piece and all the infrastructure to order the test arm, which has been obviously now invested in and we will sustain and also benefit from office staff using historically on that but should also help the commercial efforts on the MRD side, the knowledge and awareness of those types of interactions.

Got it. Thanks. That's really helpful color. I know we touched on earlier, but this is helpful. And then how durable do you see Afirma as once thyroid cancer diagnostic TAM has reached that 80% penetration, and do you have a specific time line to that penetration, Mark?

We don't have a timeline, but if you think about it the firm has been on the market for more than a dozen years at this point. And it's taken about for that long to get to the penetration that we've currently got with an 80% estimate out there is multiple years of growth still left in Afirma just to target the conditions that we currently cover and the indications that we currently have. And so we as you know we've been investing heavily in Afirma. We invested in tests. As we talked about during this call we invested in the physician ordering of experience and portal. We just launched the Afirma GRID. And so time after time, we're creating new opportunities to engage with physicians and convince even more of them to use Afirma more often in more cases, and so we're gaining wins in terms of both existing accounts and new accounts. And so yeah it's hard to put a timeframe on when that plateaus as everything eventually always does but it's clear that we've got a lot of fairly decent amount of headroom still to go even in endocrinology.

Got it. Thank you.

Thank you. One moment for our next question. And it’s from the line of Mike Matson with Needham. Please proceed.

Hey, everyone. This is Joseph [ph] on for Mike. I guess just looking at other kit development you obviously, you guys have a lot on your hands Envisia and Decipher in on [indiscernible]. but just maybe wanted to ask question more broadly if there's any other disease areas you guys are focusing on for future test development, or I guess that it's more focusing on MRD versus DI diagnostic in our assay. And just kind of wanted to get your thoughts on that?

Yeah, it's a great question. As you think about it Veracyte has really come from that single product, Afirma company to a broad cancer diagnostic company and now with the addition of MRD, we can go even further. If you think about the growth vectors that we've talked about. I'll start with geographical on it. So the success that we've had in the US with our launch of our IVD products outside the US and a clear road map of what really amounts to three or four products that we're going to launch over the next few years there. You can see that we've got a real opportunity to grow outside the US and really demonstrate that the model that we've adopted works than there has been so successful for us with the genome. Extensive publications behind our tests can benefit us outside the US as well. So that's number one. The second one is across the care continuum. And I wouldn't say we're going to focus on any area in particular rather than the entire care continuum for patients who have cancer or suspected of having cancer, all the way from nasal swab, which is focused on those patients who don't have a cancer diagnosis, but have a lung nodule and therefore our risk and helping to classify those patients almost think of that as like a part of a high-risk screening program, all the way through diagnosis, prognosis, prediction you're starting to see Decipher move into that prediction space in a very meaningful way, as there are more and more publications the year talk about the virtues and the benefits of using Decipher in that way all the way through to treatment from recurrence and monitoring. And so yeah, as you think about it that way we are able to cover a very broad part of the care continuum everything but screening for healthy people, if you think about it that way. And then the third dimension is the indications. And yeah, Veracyte has a virally prostate, breast, bladder, lung and now with MRD. you can think about how much more extensible that could also be across other indications. So one of the great benefits of the platform that we've got the large amounts of data that we generate on is that we can that is extensible across other indications as well. Of course, there always channel considerations. You have to go through there and think about as well. And we do them well. But you can certainly see there's opportunities for us to expand beyond the current indications that we have no clarity yet on what those might be. But that's certainly something we're very focused on.

Okay. Yeah, great. They obviously like the one-stop shop on gold but maybe just one more looking at C2i and I guess their platform is CE marked in Europe. Just you know I guess a wondering what's the indication or use case to that? I imagine is mostly used in clinical trials right now. Maybe if there's any strategic partnerships that are that are ongoing or prospects in Europe that you guys are still pursuing after the acquisition?

Well, there are some existing. And of course, that's a pipeline as well. And we're very selective about what makes sense for us to continue to pursue. And as you can imagine that's been a very key part of the acquisition and its integration conversations. Our approach with the test especially with the bladder test is going to be an LDT type of approach. So you'll determine TBD, if we sell a kit as an IBD in the future. That's certainly not the plan right now as far as the initial focus is to launch it as a lab-developed test in the way that we've described and leverage the platform that we've built there. So more to come, again that is again another expansion opportunity. And when I talk about geographic expansion and how MRD can play in that. There are there is a lot of optionality for us in terms of how we might use that in the future outside the US.

Okay, great. Thank you for taking our questions.

Thank you. One moment for our last question and it comes from the line of Puneet Souda with Leerink Partners. Please proceed.

Hi, guys. Thanks for the questions.

Hey, Puneet.

Yeah. Hey, Marc. Just first one on I know C2i has been asked about, but this may be and what is the level of investment that you're expecting here this year? And wondering if you can provide anything for next year sort of before you launch this assay. And on you know how should we think about gross margin given that this assay, when it starts, does this start scaling up, it does require multiple whole genomes initially and then whole-genome with repeat assays, if my understanding is correct? And maybe just on that point just help us also understand, how do you want investors to appreciate Veracyte's position and MRD market. This is a fairly competitive market and that's emerging and there's a leader in the market already. So maybe just conceptualize so that we understand what how I'm going to say it is going to be positioned in MRD?

Yes. Many thanks for that. If you don't mind I'll answer the third question first and I'll answer the first question and then I'll ask Rebecca to the second question on gross margin. But yes, and thanks for asking me. If I am glad we have an opportunity to go through this. I talked about this a month or so ago when we announced the acquisition of C2i. What we really like about this the solution and not to mention the incredible team, but they have built a product that fits so well with the Veracyte diagnostics platform that we're referring to. It as a whole genome based approach, which means we get that rich data for every single patient, and not only that whole genome for that landmark both whole genome for every subsequent sequence that we do. And so incredibly rich data, the test performs extremely well. It requires a low input of blood 4 ml. You don't have to create this bespoke assay as well, which speeds up time to turn around time, time to answer. And then a great performance that results in, as we believe, better outcomes for patients. So there's so much about the C2i MRD product in particular that we like that fits into Veracyte, not to mention that it's going to play really well into the bladder market where we have a channel and a clear path to reimbursement. So that's how I see. Now, it is a crowded space, but again, our approach to a specific indication that we have that channel is really, I think, a very significant differentiator in addition to all the other things that I just mentioned. In terms of the investment, we've done, I think, a really important thing here is we've acquired C2i and absorbed, refocused our investments and absorbed the project to develop the MRD test for bladder into our current portfolio. And as you know, we've done a really focused approach to portfolio management over a number of years, and that's enabled us to do this. And that's why we gave the guidance that we gave when we announced the acquisition that, this does not change in one way our philosophy around profitability and cash generation in particular. And so without giving an exact figure on what we're investing, because not only have we acquired an MRDs, but we've also acquired AI capabilities that we were going to invest in anyway, it's just, I think, fair to say it's absorbed in everything that we're doing. Do you want to talk about gross margin?

Yes, happy to. And just one thing to add, Puneet, we have also said in the future, to answer your question for next year, in the future we will continue to be generating positive cash flow. And so I think to any extent we'll be absolutely continuing to follow the financial philosophy we have shared with you all time and time again in the future as we go forward with MRD and any other activities that we decide to pursue. With regard to gross margin, you're absolutely correct. It is a multiple whole genome assay over different periods of time. But we have -- we've looked at this very closely, as you would expect, ahead of the acquisition. And we believe both between the ASP that we're expecting as well as the lab efficiencies that we think we can deliver, we're expecting to have a gross margin that's very reasonable, perhaps not all the way to our current corporate gross margin average, but very reasonable and something that we think more than is worth doing for the organization and can sustain a profitable business similar to how we have with Afirma and Decipher over time with obviously volume going through both the lab and the channel. So it will take a little bit of time to ramp there, but, you know, I think over time we will get to exactly where we want to be from a gross margin perspective and we're confident to that end.

Got it. Okay. That makes sense. And then just briefly on the FDA's So it will take a little bit of time to ramp there. But you know, I think over time, we will get to exactly where we want to be from a gross margin perspective and we're confident to that end.

Got it. Okay. That makes sense. And then just briefly on the FDA's expectations to regulate the cancer LDTs. Any latest thoughts from your end and anything changes spend wise or OpEx wise from your perspective if that was to be implemented at this point?

At this point, no changes. One of the things I say about verified is we're very well prepared for that because you are testing our lab developed testing process and our quality systems are very, very robust, well proven the guidance the on publications behind our tests, as we've talked about length of very extensive. And so, as I think about it with the kind of from lab and we have to kind of test, I think fit well into any kind of model that they come out with. Clearly, we'll need to invest in a multi-stage process, but ultimately gets launched there will be some level of investment, but not and I don't think as great as many others who have got to kind of create that term that backdrop that we've got would have to incur. And so we're quite term we're quite comfortable with where we are there. We've got the optionality. We've got the experience of IBD development. And so I'm not overly concerned about the pathway whereas involved as others as you can imagine in trying to help us comment on that, respond to that and shape the way that that actually ultimately gets launched.

Got it. Okay. All right. Thank you.

Thank you. And as I see no further questions. I will turn it to Marc Stapley for final comments.

Great. Thank you and I appreciate it. So as you can see we ended a very strong year in 2023 and we set ourselves up well for continued growth in 2024 and beyond. I believe our success will continue to hinge on three core pillars of execution, meaningfully expanding the markets we serve, utilizing our established verified diagnostics platform across geographies, indications and the care continuum, embracing the best technology adding new capabilities such as MID. and AI to our world-class platform and driving revenue growth with discipline and a focus on profitability and continued positive cash generation. These tenants will allow Veracyte to continue to build a strong foundation for growth, while achieving our vision of transforming cancer care for patients all over the world. I would like to thank our entire team for their commitment hard work and passion. It is fueling our progress and driving our results. So thank you.

Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect.