Good day, and thank you for standing by. Welcome to the Veracyte Second Quarter 2025 Financial Results Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Shayla Gorman. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for a discussion of our second quarter 2025 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer; and Rebecca Chambers, our Chief Financial Officer. Dr. John Leite, our Chief Commercial Officer; and Dr. Phil Febbo, our Chief Medical and Scientific Officer, will join us for Q&A. Veracyte issued a press release earlier this afternoon detailing our second quarter 2025 financial results. This release and a copy of the presentation we will review during the call today are available in the Investors section of our website at veracyte.com. Before we begin, I'd like to remind you that the statements we 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. Additionally, 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 the 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 Investors section of Veracyte's website. I will now turn the call over to Marc Stapley, Veracyte's CEO.

Thank you, Shayla, and thanks, everyone, for joining us today. I'm pleased to share details of our second quarter performance and updates on our key growth drivers. At Veracyte, patients are our purpose. Our work is grounded in bringing meaningful actionable insights to clinicians, so that we can drive better health outcomes for patients, which in turn results in greater economic value to global health systems. I couldn't be more pleased with our Q2 performance. We delivered 14% revenue growth year-over-year with total revenue of $130 million. This outstanding result was driven by testing revenue, which also grew 14% year-over-year or 16% after adjusting for Envisia. Decipher and Afirma continued to advance market share and delivered another strong quarter of impressive volume growth, further bolstering our confidence in the ongoing durability of our core testing business while also delivering our groundbreaking adjusted EBITDA margin of 27.5%, vastly exceeding our expectations. Our vision is to transform cancer care for patients all over the world. And I couldn't be more proud of our team and their commitment to serving our advanced genomic tests to over 700,000 patients to date. We are focused on a number of strategic initiatives to fuel sustained growth at a differentiated level by creating layers of short-term, midterm, and long-term drivers. Today, I'm excited to share our progress across these initiatives. Starting with Decipher, we delivered approximately 25,500 tests, putting us on a trajectory to exceed 100,000 tests annually for the first time, representing a truly remarkable milestone. This resulted in year-over-year volume growth of 28%, our 13th consecutive quarter of over 25% year-over-year volume growth. It was also our second highest ever sequential increase in volume, superseded only by Q2 last year, which benefited from the timing of pivotal NCCN guideline updates. This performance reflects pristine execution…

Thanks, Marc. Q2 was a fantastic quarter with $130.2 million in revenue, an increase of 14% over the prior year period. We grew total volume to approximately 44,950 tests, a 15% increase over the same period in 2024. Testing revenue during the quarter was $122.3 million, an increase of 14% year-over-year, driven by Decipher and Afirma revenue growth of 24% and 5%, respectively. Total testing volume was approximately 42,400 tests, an increase of 18% over the prior year period. Testing ASP was $2,881, down 3% compared to the prior year, primarily driven by the impact of higher prior period collections in Q2 2024 as well as the Afirma laboratory benefit manager impact discussed last quarter. Adjusting for the impact of $1.9 million of prior period collections in the quarter, testing ASP would have been approximately $2,825, roughly flat to the prior year period. Second quarter product volume was approximately 2,500 tests. And product revenue was $3.6 million, down 8% year-over-year. Biopharmaceutical and other revenue was $4.3 million, up 21% year-over-year, higher than our forecast given the benefit of a U.S. Decipher biopharma revenue project that completed during the quarter. Moving to gross margin and operating expenses. I will highlight our non-GAAP results. Non-GAAP gross margin was 71.5%, up approximately 30 basis points compared to the prior year period. Testing gross margin of 73.9% exceeded our expectations, driven by improved lab efficiencies. Compared to the prior year, gross margin was slightly lower given the benefit of prior period cash collections in Q2 2024. Product margin was 20 basis points higher from the prior year at 52.3%. With the sale of the Veracyte SAS manufacturing business and our transition to a contract manufacturing model, we expect product gross margins to decline in the second half. Biopharmaceutical and other gross margin was 18.5%,…

[Operator Instructions] Our first question comes from the line of Doug Schenkel of Wolfe Research.

So Rebecca, you may have kind of just run through this as you went through your guidance comments. So sorry if I'm kind of saying something that you already ran through. But based on Marc's earlier comments and you're tracking above 100,000 Decipher tests this year. I think that takes you over 25% growth for Decipher revenue this year or close to it. What -- as we think about the durability of that, what are the key drivers to maintaining something like 20% plus growth for the next few years for Decipher? Is it further market penetration? Is it share gains? Is it digital pathology integration? How should we be thinking about that? And if indeed -- and this is my second question. If we can have some confidence that Decipher keeps growing at these levels for the next few years. If we assume a continued moderation in Afirma revenue growth down to mid-single-digit levels over time, that still should be enough to maintain double-digit growth for the business over time at the top line. And that's in advance of getting any additional pipeline contributions. Is that a fair way of thinking about it?

Yes. Happy to do so, Doug. Thank you. And I'm going to take part and I think Marc is going to help on some of this as well. But you're absolutely right. Decipher is just doing -- the team is just doing a phenomenal job with an absolutely critical test for that patient population. Our guide actually implies slightly lower revenue numbers. I think you're thinking more on a volume basis. And that volume number does make more sense to me than a revenue number. So the guide implies 22.5% to just over 24% revenue growth for Decipher. So that's one thing to take into account. So that -- I think the drivers of that growth here are multiple different opportunities. The first, obviously, the metastatic population that Marc referred to and kind of the halo effect that that has brought into conversations with docs on the high-risk side, which is about a large portion of the population and the most underpenetrated of the populations, underpenetrated of the risk categories. Additionally, we are always going with our Veracyte diagnostics platform with more data and more use cases, more predictive and prognostic capabilities. And then the sales team is just executing really well. So I would say those are the drivers for Decipher growth over a multiyear period. I think I don't want to guide to future years, but I would say, we are very confident and I'll turn this part over to Marc. But effectively, between Afirma and Decipher, we are absolutely confident in our ability to demonstrate double-digit revenue growth until those longer term growth drivers come in. We've been pretty much a broken record on that for the last couple of years. And actually, I think we've delivered even beyond that as you look at the updated revenue guide here of 14% to 15% for testing.

Yes. Thanks, Rebecca. And Doug, thanks for the question. I totally agree. I mean, we've guided that we think these tests can get to 80% market penetration. And we started this year with the Decipher market, the prostate market at around 40%. And we think we have what we need in terms of the product set to drive to that 80% and its market share gains and penetration. And obviously, there are some incidence growth as well there that helps drive the growth. If you think about the second part of your question, I talked about it in the script around layers of short-term, medium-term, and long- term growth drivers, right? So you pointed out very clearly, Decipher continuing to grow. We've got multiple years ahead there. Afirma is later in its life cycle. But we've talked about Prosigna and launching that in the middle of next year, muscle invasive bladder cancer for MRD and launching that in the first half of next year and then MRD indications every year after that in 2027 and beyond. We will get to completion on NIGHTINGALE and with good results. And we should be able to launch Nasal Swab. And we're not done there. We've got a rich and exciting portfolio and a financial profile that gives us an opportunity to continue to invest in new indications, new products, new expansions across the care continuum, new studies, more clinical evidence, driving more guidelines, and so on. So to your point around the double-digit growth, yes. It's certainly something that we think a lot about and we've set up our company to deliver that. And as long as we continue to make the right investments, you would expect it to do so.

Our next question comes from the line of Andrew Brackmann of William Blair.

This is Maggy Boeye on for Andrew today. Maybe first, just to start, I can appreciate it's still early days for the metastatic launch. But just based on the early interest you are seeing, can you talk about what you expect the growth contribution to be in the back half of the year for Decipher in the metastatic population and just how you're thinking about that contribution as we head into 2026?

Yes. I mean I'm going to ask John to talk a little bit about the successful launch so far. And of course, we're only a couple of months in, as you point out, of the metastatic and also an interesting trend that we're starting to see in high risk and then Rebecca can kind of triangulate that back to you, for you to guide.

Yes. Thanks for the question. So far, what we've seen is we've seen really good response and interest from physicians who are in these large practices. And it's taking -- one of the lessons learned is that it's taking a multidisciplinary approach towards managing these patients. So we have to call on urologists. We have to call on the med-oncs, we have to call on the rad-oncs, and align all of them around the operational impact of implementing the Decipher metastatic test, how they think about the operationalization of that test. But the discussions around the CMP data have been extremely impactful and the response so far is good. So we see good upside for the test in the future. Yes. So with regards to the high-risk discussion, one of the arms of the CMP trial, Arm G, dealt with the investigation as to whether the addition of abiraterone, which is a next-generation ARPI to androgen depletion therapy would have a sustained effect towards patients who tested Decipher high risk. And the answer was yes. Patients who test Decipher high risk, both in localized high-risk disease as well as the metastatic setting, both saw benefit from the addition of the ARPI. And in a sense, that's reinvigorated the interest in the conversation again on high risk. And then overall, there's just a growing awareness of the robustness of Decipher as a prognostic signature across all these very different indications. And it speaks to just how well designed the assay has been and how well validated it's demonstrating to be.

And then on guidance. So thank you for the question. I wouldn't say that metastatic is a meaningful contributor to the guide this year in and of itself. I would say we're expecting a launch here that is successful, but not overly impactful given the large denominator and lending itself to a multiyear adoption curve that we would expect similar to that we saw with Decipher out of the gate once it also got a biopsy Medicare reimbursement. So in '25, not a huge impact. I would say more of the halo effect John mentioned on high risk is more impactful on the guide. But going into '26 and beyond, this is 10% of the incidence population for high risk that does require this critical information. And so as we have STAMPEDE published. And we hopefully get guidelines over the coming years. It will continue to be a contributing factor to Decipher revenue growth and absolutely is part of the reason why we have the confidence we do in delivering double-digit revenue growth on a total company basis here for the foreseeable future.

And then just maybe for my follow-up, one on Prosigna. So I appreciate some of the efforts that you outlined in the prepared remarks. But can you share what some of the key milestones you will be focused on, particularly as it relates to drive greater adoption and revenue growth for Prosigna after launch, be that guidelines, additional utility studies, or reimbursement?

Yes. I mean our first milestone, which we talk about is the launch in mid-'26 and of course, also the outcome of some pivotal study results, some early data from which we saw at ESMO recently. Beyond that, we haven't said specifically what additional clinical studies will support the tests. But you can imagine, I mean, we're going to just going to follow the very same formula that we've applied with Decipher. And remember, this is a whole transcriptome-based test as well. So we'll be able to drive research around the whole transcriptome here and there'll be plenty more clinical studies. I don't know if any of the team wants to add anything specific.

More to come.

The only other thing I would add is that, obviously, for a new product to launch, we'll be having to put in a tech assessment and get pricing and all that fun stuff. So that would be one data point along the goalpost of getting the product launched.

And of course, the building of the sales team for that as well, which we'll do gradually as we've always said we will do. So thank you for the question. I appreciate it.

Our next question comes from the line of Puneet Souda of Leerink Partners.

I'll ask my questions in one. On Afirma, obviously, solid growth there still. Are you seeing any changes in the share dynamics or ordering patterns in endocrinologists at the current penetration level? Just trying to sort of understand how should we think about that growth trajectory as we head into '26? And how should we think about the ASP stability there with the LCD and the V2 transition? And then secondly, on MRD, can you just remind me in terms of your commercial approach there on cross-training the reps or hiring more? And how are you targeting that in academic versus community oncology when you launch this in the first half '26? And if you could just remind us on the MolDx timing as well.

Go ahead on both of those.

Sure. I can take both of those. So we've not noticed specifically any meaningful changes in the ordering patterns of customers on Afirma. It's obviously a more mature product. It's a more penetrated market. We have the lion's share of share. I think overall, growth is going to come from share dynamics. And so the bulk of what we need to do better is to service those customers, improving our service levels overall continuously, continue to improve on clinical evidence to demonstrate the clinical utility of the test and differentiate via our GRID offering, which invites more collaborators to do that research. That drives that clinical utility that ultimately drives more demand and market adoption. Regarding your second question on MRD, we've mentioned this before. Our commercial approach for muscle invasive bladder cancer, which is the first indication that we plan to launch, is absolutely to leverage our current Decipher channel. These bladder patients are managed by the same urologists that we call on for Decipher Prostate. And the goal there is to cross-train our sales reps to have that conversation about bladder and to continue to service the same channel that we do today. And then regarding academic versus community, we have contacts across all institutions. Remember, we have a very healthy network of key opinion leaders who work with us on Decipher Prostate and GRID. We plan on leveraging the same for MRD.

And then a couple of cleanup items. MolDx timing, we said we will have reimbursement prior to launch. As Marc mentioned, that TA was submitted back in March. And we're in the midst of doing the advance with MolDx on that. And then with regard to the Afirma growth trajectory and your ASP stability question. So the implied guide, this updated guide for Afirma is 6% to 7% revenue growth and volume of high single digits. Given the LBM impact that we had back in '24 that has been cleaned up since November of '24, we will start to lapse that, Puneet, here in November of '25. And so as we enter into '26, with the exception of very small prior period collections here in '25. We won't have the same headwind that we had going through this year. So that's good news. Hopefully, we will get to more ASP growth over a multiyear period for both Decipher and Afirma. There's no reason why we shouldn't. But we are excited. I mean we are continuing at high single-digit volume growth for Afirma in 2025. We're excited that that is -- we're still seeing the strength there. We do have the next version of GRID coming here later this year. And that we are expecting will set us up very nicely for 2026 volume and revenue growth for Afirma. So I would say with the nuance or nuisance is a better way to say it, of the ASP LBM issue for Afirma that we're now just working through our financials because it's been cleaned up behind us. I think this is going to be a really -- '26 is going to be a really great Afirma year.

Our next question comes from the line of Subha Nambi of Guggenheim.

Could you provide any additional color on the positive feedback you received on the tech assessment from MolDX on the MRD asset? And then are you hearing anything from urologists ahead of the launch for a need of whole genome-based MRD test? And then I have a follow-up on Decipher. You had a press release about Decipher Prostate GSC data being integrated with a new NCIC database. Could you provide some added color on this as well? Is this more for the general physician support or any incremental adoption driver? Is it something that we could potentially see any benefit tangibly in the Decipher results?

Thank you. On the first one, the MolDx submission tech assessment, I'd say it's in the normal process. Rebecca mentioned, we're going back and forth with MolDx. There's nothing specific to call out there. Importantly, the whole pricing discussion is a key component of that. The tech assessment is the first milestone and then you get into the pricing decisions. I don't know if you have anything you want to add to that, John? I didn't understand the second question.

I didn't understand either.

Well, so the second part of that was, are you getting feedback from urologists on whole genome-based -- the desire for a whole genome-based MRD test?

Do you want to take that one, Phil?

Yes. This is Phil. So what I can say, Subha, is that in general, as we've engaged different physician populations, there's incredible enthusiasm, growing enthusiasm for MRD and incredible enthusiasm for the additional data that comes with the whole genome approach. As we know, as you engage with sequential therapy in bladder cancer, as it goes through neoadjuvant, definitive local therapy and then postoperative care, there's a lot of changes that the disease can go through. And whereas MRDs that are focused on a panel and detecting disease, can detect the disease, they can't monitor the clonal evolution and that can happen. And the selection that go on and help some agility with the managing of the care. And so people are really looking at that. And with the whole genome approach, you can look at broad genomic signatures and how those are changing of the tumor while under care. I see that as super important, especially as we think about the benefit of our whole genome platform is that it serves multiple cancers. And you can dial in different capabilities based on the needs of that cancer. And when we engage with folks and they talk about whole genome, they see the RUO reports that will become part of our Veracyte diagnostic platform. They get very excited about that additional information.

And this is just obviously a continuation of our standard philosophy here of more data leads to more insights. We think it makes complete sense to sequence whole genomes to be able to have that data for future research. And then your last question was regarding the SEER data combination. I don't know, Phillip, you want to take that as well?

No, the SEER data was -- that was an important collaboration we had with the NCI and their SEER database. And we felt it was responsible after doing the analysis and the publication to make that data available. And so that opens up the opportunity for investigators to dive into that integration of the Decipher data together with some of the outcomes available through the SEER database in a way that protects patient confidentiality and privacy. And I think as we've seen, the more investigators get comfortable with Decipher data, with the Veracyte Diagnostics platform, that's all research. But I certainly think it raises the visibility of our company, raises the visibility and the confidence in our diagnostic clinical tests that they're ordering to manage patient care.

Just has a derivative impact.

Yes.

Our next question comes from the line of Yuko Oku of Morgan Stanley.

I wanted to touch on digital pathology, acknowledging it's only available on a limited basis to research collaborators. Could you share early feedback on that offering so far? And would you also provide updated thoughts on whether you may offer it more broadly, either in the clinic or perhaps to biopharma customers?

Yes. Great question, Yuko. I wouldn't say any specific feedback so far on that. I think in general, feedback on digital pathology in our space is consistent with our understanding and expectations that it's a fairly nascent technology or a nascent application of the technology in our space. It is likely, if anything, complementary to molecular diagnostics. The challenge is going to be if it's contradictory, there's contradiction and confusion for the market and for the physicians in any way. And so we continue to believe that the right way to think about that technology is in the same way that we thought about molecular diagnostics. You work with KOLs. You do very robust science and research, a number of studies that then can be relied upon for treating patients clinically, which is at the end of the day. We want to be thinking about at the end of every one of these tests is a patient who is dealing with a very difficult situation, probably the most difficult situation in their lives and we've got to have robust tests. And so our decision to launch this as part of GRID is to enable that research. And so our feedback so far from KOLs is that's the right approach. We're on the right track with that. They'll support research. I expect to see some interesting things coming out in the future. And as I've always said, if we wanted to launch our own product with DPI either alongside or with Decipher, we could do that, but we wouldn't do that without the robust science behind it. Do you want to add anything?

No, I think that's well said, Marc. We have a proven process and strategy of working very closely with key opinion leaders who contribute a large part in the advancement of the science and the clinical insights that ultimately translate into demand for our products through continuous improvement to our products. We see no reason for why that should be different as we apply this new very exciting and potentially transformational OMIC, but the process is the same. It's working through our collaborators, developing the evidence that arms us with the confidence then to improve our test.

And back to the data, we have incredible amounts of data. As I mentioned in the call, 90,000 samples scanned. We're going to implement scanning as part of our production capability. So you combine that with whole transcriptomes. It's just exciting what we could potentially do with that data.

I was going to double down on it.

Go ahead.

We're going to take the rigorous approach that it requires to bring a test to market. But because of our GRID offering and because of our aggressive approach to operationalize the scanning and then cover our historical volume. We're very -- we can move very quickly to get to a data set that no other company is positioned to do. So we're very bullish as far as our ability to move quickly through a rigorous clinical program and bring that to market better than anyone.

And then while you're focused initially in launching MRD platform in muscle invasive bladder cancer, you're also broadening scope in other cancer types starting in '27. So given the unique approach you're taking in MRD, as you touched on earlier in the call, which indications or cancer types do you see your MRD platform delivering the best value?

Great question. We've said consistently that you can imagine us launching MRD in indications where we have a presence. And so you think about where we are today, we're covering urology broadly, including prostate, bladder and that could be even more expanded. We're going to be launching our breast test. We're going to be launching our lung-based test. So those will be obvious indications. But it doesn't mean they're the ones and the only ones we're going to launch. And then there are different modalities within each of those indications like we're starting with muscle invasive bladder cancer, but there's other modalities. So more to come on that. I wouldn't like to speculate yet.

Our next question comes from the line of Lu Li of UBS.

And I wanted to go back to Decipher as well. So you talked about the partnership with Helix to offer the option to order hereditary cancer test. I wonder, can you give us a little bit more kind of detail in terms of like why? And then what kind of like cross-selling benefit that you can have from this partnership?

Yes. Thank you for the question. The why is fairly straightforward. So NCCN guidelines have very clear recommendations for prostate cancer on the types of patients, namely high-risk and metastatic who should be assessed for germline variants and in particular, to determine therapeutic options vis-a-vis the addition of PARP inhibitors or even to assess overall family risk. Clearly, this is an area that's not an area of proficiency for us. And it would take us some time and possibly even distract us from doing other things. So we thought the partnership route was perfect. And Helix revealed itself as a very exceptional and very collaborative partner. And that will kick off in the fall. We'll start accepting samples and supporting customers. And we look forward to reporting on further results on that.

And then my next question for Rebecca. So great margin in the quarter and then you're also raising the guide. But I'm wondering what will be kind of a good starting point for 2026, given that you have the new product launches coming out. What will be kind of like the balancing act that you have for it? And then it will be great if you can refresh us about like the cost profile for both the MRD and the Prosigna.

Absolutely. So that -- I'll take the second part first. On the cost profile of Prosigna, think about that exactly as the cost profile of what Afirma will be, maybe a little bit higher, but less than 10% higher given the histopathology component. But effectively, Afirma would be a great proxy for once we have the V2 transcriptome out there. On MRD, we are doing 3 whole genomes upfront and then subsequent whole genomes. We haven't discussed specifically exactly what that's going to look like. We have multiple R&D projects ongoing. And Phil gets asked that exact question often from me. So all jokes aside, we are making good progress on the cost of whole genome sequencing. But the margin profile of that is going to be as much tied to the Medicare reimbursement percentage of the population as our cost for indication by indication. So good progress there. We're not ready to necessarily share what it is. But we do think that the benefit of what whole genome sequencing provides us in the MRD in terms of differentiation is more than enough to offset the incremental costs. Similarly, on the Decipher front, if we were doing a qPCR assay, our margin profile would be immensely better. But we wouldn't be the #1 leading test provider here, right, because we effectively have the incremental data. So this is a fundamental part of our strategy. And the costs end up being a good return for us in terms of incremental sales and less R&D and sales and marketing expense. Going to 2026, you are ahead of us in terms of our budget planning process. So I'm not ready to sign up for a number here today. Obviously, we've made great strides in our ability to deliver incremental profitability. But we also…

Our next question comes from the line of Mason Carrico of Stephens Inc.

Sorry, I joined in a bit late here. So hopefully, this has not been asked. But has the metastatic indication improved the marketability of Decipher to new urologists who maybe hadn't used Decipher previously? Has it accelerated new account wins in any way?

Yes. Let me handle that one. I think it's clear that the marketability of the test being able to say that it's the only test that covers the entire care continuum up to metastatic now, I think is valuable. We're starting to see some interesting trends. You might have missed it, but John mentioned earlier, the trend of high-risk interest growing as a result, we think, of having the metastatic product available. So it's difficult to quantify it exactly. But -- and it's also early stages since the full launch. But we're so far very happy with what we're seeing.

I mean could you talk a bit about the commercial payer landscape for metastatic patients? I mean, do you have coverage in place? Could you speak to maybe the number of covered lives that you have today and potentially the opportunity before NCCN?

So yes, on the coverage policy, there is an LCD in place for Decipher metastatic.

Two-thirds of which -- yes, so the Medicare population is closer to about 2/3 of the total population. So we'll be in good stead out of the gate. We will have to go through and update contracts over time. And so that will be kind of a long tail, if you will, to get to the same 200 million covered lives. But the good news is with such a high Medicare population, we'll have a slightly different ASP for Decipher metastatic. But here shortly, I would think those 2 things start to converge.

Yes. And we think there's a strong evidence trail as well, Mason, supporting the use of Decipher in the metastatic indication. So we expect data to emerge here very, very soon in publications. Phil can go into those a little bit further. But we expect those to make their way into guidelines. And again, guidelines will drive demand and adoption as well as the -- improve the payer landscape and updating their own coverage policy.

Yes. And don't forget, Mason, if you think about Decipher in the localized setting, we made tremendous traction with before guidelines, right, before being in guidelines. The guidelines certainly provide a step-up, but they're very helpful, but not necessary to start that ramp. And so I wouldn't see that as a gating factor.

Our next question comes from the line of Mike Matson of Needham & Company.

So just one on Prosigna. Can you just talk about the market opportunity there? It sounds like it's an established market here in the U.S. So how big do you think that is in terms of dollars? And is this -- I assume it's fairly mature at this point. But is there room for more penetration of the testing within the targeted group of patients?

Yes. Thanks for the question. It is absolutely a very mature market, primarily, I would say, dominated by one participant. Nevertheless, I think there are opportunities in a sense that the data coming from the OPTIMA trial will highlight where Prosigna has a distinct value proposition in predicting patients that absolutely will benefit from chemotherapy. In terms of overall size, just over 200,000 patients or so are indicated for testing. A good number of those are going to be Medicare patients. We're going to leverage our network to update our contracting with payers where we can. And as Rebecca mentioned earlier, it's going to require us to build a brand-new channel, but we're confident in the upside.

And Mike, in terms of ASP, that's part of what we'll be resolving between now and the launch in the middle of next year. But you can kind of -- you can bookend it between where it's currently reimbursed for MolDx and where Afirma and other tests like that are.

And then just a financial one. So you've got $320 million of cash. I think that's about 70% of your market cap. You have no debt, you're positive free cash flow now. Your adjusted EPS is positive. So your shares look pretty undervalued here. So would you consider share repurchases with some of that cash? Why or why not?

You can imagine we go through those kinds of conversations. The potential uses of cash in terms of strategic uses, share buybacks and so on. And there's a multitude of variables to take into account there. We're certainly in a very fortunate position to have built the financial profile that enables us to have those options and the optionality. But at this time, we're very focused on building the business and making sure we're investing in the right things to grow and allow us to target even more and more patients. So no specific commentary around uses of that cash at this point.

Yes. I wholeheartedly agree. I would just say. I think your math is appropriate on the valuation. The other thing I would add is the landscape of opportunities is pretty ripe right now. We continue to have a very high bar for M&A. But I think we're now in year 3, perhaps, of some of the valuation disconnect across the industry. And so I think there are a number of different assets that could be interesting. And so we always are looking. That hasn't stopped. We don't always do deals because the bar is so high. But we're absolutely keen to continuously assess and bring to bear what make sense for our shareholders and for patients and employees.

Our next question comes from the line of Sung Ji Nam of Scotiabank.

This is Corey Rosenbaum on for Sung Ji. So specifically for the Afirma transition to V2 Transcriptome, I appreciate the commentary you've provided thus far. But would you be able to break out the gross margin benefit that could be expected by the time that is fully rolled out?

Yes. I would like to -- I'm happy to talk about it qualitatively. We will be using that to reinvest in the business. And so I don't want folks to get too far ahead of their skis on the profitability side. But qualitatively, around 1/3 of our costs are sequencing and library prep in nature. We're currently on the NextSeq 500 and we'll be moving to the NovaSeq X. And so for the portion of that 30% that is sequencing related, we will, in time, see a meaningful reduction in our cost structure.

And one of the things I really like about this transition other than the obvious COGS financial impact of it is, it gives us a unified platform that we can use for other tests. And as we've already said, we're going to be launching Prosigna on that platform next. And you can imagine it's extensible and scalable even more broadly than that.

This concludes the question-and-answer session. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.