GeneDx Holdings Corp. Q2 FY2024 earnings call

Key Points

• Second quarter was strong with $68.9M revenue, 62% gross margin, and 9th consecutive quarter of cash burn reduction.
• Raised full-year revenue guidance to $255M-$265M and aims to be profitable in 2025.
• Focused on exome and genome, with exome and genome accounting for over 74% of revenue.
• Partnered with Epic to integrate with health system workflows.
• Invested in genome product enhancements to reduce turnaround time, expand sample types, and increase diagnostic yield.
• Made progress on state policies for exome and genome testing access, including bipartisan support and legislation in states like Connecticut and North Carolina.
• Launched a patient access program for epilepsy patients in partnership with biopharmaceutical leaders.

In the second quarter of 2024, GeneDx delivered nearly $69 million in revenues. Exome and genome revenues grew 77% year-over-year to $50 million, accounting for over 74% of total revenue. Adjusted gross margin was 62%, up from 37% a year ago. Exome and genome tests accounted for over 18,000 this quarter, a 52% year-over-year increase. Volume and mix shift, improved average reimbursement rate, and cost per test leverage contributed to gross profit growth and margin expansion.

Guidance

• Raised full-year 2024 revenue guidance to $255M-$265M.
• Reiterated adjusted gross margin guidance of 60% or higher for 2024.
• Net cash burn guide for 2024 is $65M-$75M, contemplating absorption of legal settlement if required.
• Expect to turn profitable in 2025.

Risks

• Complex commercial insurance payer environment with narrow interpretation of archaic medical policies and administrative requirements.
• Uncertainty in timing of legal settlements, including the $10M payment due in December 2024.
• Seasonality effects with Q3 typically being lighter than Q2 and Q4.

Q: Maybe starting with pharma, biopharma. It looks like you added 11, I think you had 21 at the end of the first quarter. So maybe just talk a little bit about momentum, spend on biopharma, how much is data versus kind of new program ads?

A: Certainly. So we added, as you pointed out, several new programs for the quarter. We’re really pleased some of that is repeat business from existing biopharma partners -- these are the nature of these programs predominantly connecting biopharma partners with providers who have patients who may be eligible for a clinical trial. And then as you saw in June, we announced a program in support from biopharma companies to open up access to epilepsy exome testing. And so we are through that program able to run all patients through insurance, work with biopharma companies on those patients who have been denied to be able to ensure that no patient has a barrier to that testing. So it’s data by way of connecting the biopharma companies to patients and we continue to see that as being the most, I think, representative commercial approach for the data business over the next 18 months or so. It’s meaningful not only in terms of building up that ecosystem, diversifying our revenue streams, but I think importantly, really paving a path forward for a lot of these patients to make sure that they know what they can do beyond getting a diagnosis being able to connect them with those next steps.

Q: And then what are you assuming for whole exome genome mix and revised guidance? Can you kind of bridge the new guide with the old and what’s getting better?

A: Yes. So look, we’re really encouraged with the trajectory of exome and genome volumes from a mix perspective to 31% was a function of really strong underlying volume growth for exome and genome, but then also growth in other lines. And we continue to look at the test menu and our offerings to optimize for unit economics as well as clinical impact. We’ve said previously, I expect sequential growth in exome genome mix in terms of total tests anywhere from 1% to 3% per quarter. We delivered that this quarter, and I’d expect a similar pacing for the remainder of 2024.

Q: And last one just on pricing, over 2,800 in 2Q. Is there still kind of room to go in the back half of the year? And then, Kevin, I think you talked about reaching profitability in the next couple of quarters. I mean that’s a little bit different than what you previously said on 2025. I’m just curious if you can give us a sense of when in 2025, can you think you’ll hit it?

A: Really encouraged about the performance on collection and bringing down denials to raise that average reimbursement rate. Previously, we said expect with each passing quarter of 2024 to assume something close to $100 in uplift in that aggregate rate. We were able to outperform that in the second quarter, and I think that remains the expectation is that we ought to be able to raise that rate something in the order of magnitude of $100 per quarter for each of the remaining quarters in 2024. Overall, really strong with where we came out in the second quarter. We’re really pleased with where we came out. Overall, on timing for returns [ph] of profitability, look, we just posted a net loss of sub-$3 million, $2.7 million. So we’re right on the doorstep. It will be in the coming quarter. The guide reiterated that the full year of 2025 on that measure of adjusted net loss, the balance of the full year $25 million will be profitable, and there will be a quarter upcoming here, likely in the first half off 2025, but we’re on the precipice of hitting that milestone.