Negative Points

• Reduced Decipher volume guidance by approximately 1% (1,000 tests) due to lower-than-expected growth in low-risk setting.

• Prosigna and TrueMRD revenue contributions are excluded from 2026 guidance due to lack of Medicare reimbursement for Prosigna and early launch stage.

• Prosigna launch faces headwinds from EMR integration and reimbursement uncertainties, with Medicare coverage still pending.

• Low-risk Decipher growth is only single-digit, impacted by NCCN guideline changes, limiting near-term expansion.

• Increased operating expenses by 16% year-over-year, driven by investments in launches and R&D, which may pressure margins.

• TrueMRD is in early commercialization stages with no revenue contribution expected this year, limiting near-term impact.

• Prosigna adoption may be slower due to the need for physician education and workflow integration, despite early enthusiasm.

• Affirma faces a harder comparison next year due to benefits from no-result rate improvements and PPCs in 2026.

• Guidance assumes no PPCs in the back half, which could lead to volatility if collections are lower than expected.

• Potential for increased competition in the breast cancer testing market, though not explicitly mentioned, remains a risk.

Q & A Highlights

Q: With the lower Decipher guidance of about 1,000 tests, are you seeing a threat specifically from AI-based testing, and how do you view the future workflow between AI and molecular testing? A: Marc Stapley (CEO) clarified that the reduction is not due to AI competition but is isolated to the low-risk category, driven by the 2024 NCCN guideline change that removed genomic testing for active surveillance. He noted that molecular and AI tests are complementary, measuring different biology, and physicians prefer more information. Rebecca Chambers (CFO) added that the strength in intermediate and high-risk categories remains robust, with low-risk representing an incremental growth opportunity for 2027-2029.

Q: Can you provide more color on the commercial strategy for Prosigna, particularly regarding EMR integration, which has been cited as a headwind for adoption? A: John Leite (Global Chief Commercial Officer) acknowledged that EHR integration is critical for streamlining workflows and automating test ordering at scale. He stated that Veracyte is heavily investing in internal and external resources to integrate with as many practices as possible, leveraging existing efforts from the Decipher and Affirma businesses to accelerate Prosigna's integration.

Q: What is the current penetration level for molecular diagnostics in the low-risk Decipher population, and where do you see it going over the next few years? A: Marc Stapley (CEO) stated that Veracyte is approximately 20% penetrated in the low-risk market, with penetration growing every quarter. He noted that for growth to accelerate into double digits, NCCN guideline inclusion will be needed, which is expected to be supported by multiple study readouts in 2027-2028. Rebecca Chambers (CFO) added that the company believes it can achieve at least 80% penetration in this segment, similar to other risk categories, highlighting significant white space.

Q: Prosigna launched with commercial coverage but not MolDx. How are you managing patient access for Medicare beneficiaries, and what is your expectation for the MolDx timeline? A: John Leite (Global Chief Commercial Officer) explained that Prosigna already has Medicare coverage via the FDA-approved product, and the transition to the centralized LDT requires a tech assessment submission covering lab validation and bridging studies. He noted constructive exchanges with MolDx, expects approval "eminently," and guided that pricing could be around $2,500 at the low end.

Q: The first two quarters have been meaningfully above the 26% adjusted EBITDA floor. How much of this is due to pulling forward investment, and can you provide color on the level of investment for Prosigna? A: Rebecca Chambers (CFO) stated that the company is expanding the Prosigna sales force from roughly 10 to 15 people this year, which is not a material cost. She emphasized that the guidance reflects a huge opportunity to invest in the pipeline across MRD, Decipher, Affirma, and Prosigna to drive higher future revenue growth. She also noted that PPCs, which are not guided, have been a significant contributor to outperformance, and Prosigna volume in the back half will create a slight gross margin headwind.

Q: Was there any impact from ACA enrollment on Decipher low-risk volumes, and how should we think about the stable growth trajectory for Decipher overall? A: Marc Stapley (CEO) attributed the low-risk volume adjustment to comp issues and the NCCN guideline change, not ACA enrollment. He described Decipher's growth as highly predictable, with a trend line of approximately 20,000 tests per year plus or minus 1,000, and expects this to continue for the next couple of years. Rebecca Chambers (CFO) reminded that Affirma will face a harder comp next year due to the no-result rate benefit and outstanding PPCs in 2026.

Q: Can you elaborate on the market traction for Prosigna since launch, particularly regarding the premenopausal and node-positive populations, and any volume numbers for this year or next? A: John Leite (Global Chief Commercial Officer) noted that the market responded very favorably to the Optima data, with the premenopausal and high node burden results being game-changing. He stated that while some physicians will start with these populations and expand, others are ready to switch entirely for logistical ease. He declined to provide volume guidance, stating the company needs more data over the coming months to guide accurately.

Q: Can you update us on the TrueMRD pipeline, including when we should expect the next data readout and the next MolDx submission or indication? A: Marc Stapley (CEO) stated that the focus is currently on the muscle invasive bladder cancer launch as the landmark test to pilot the MRD approach. He mentioned that development and clinical teams are working on the next assays and evidence development, with a review of ongoing studies this week. He indicated that more details will be shared when the company is ready to launch additional tests, with the bladder test serving as the proof point for expansion.

Q: Can you comment on early adoption of Prosigna, and do you believe the OPTIMA study results could be key to guideline inclusion? A: John Leite (Global Chief Commercial Officer) expressed satisfaction with early adoption, noting positive reactions from physicians and even direct patient inquiries. He confirmed that the OPTIMA trial is generally acknowledged as Level 1A evidence and should make its way to guidelines, but publication is the next milestone, which is out of the company's hands as it is an independent study.

Q: Can you give an update on the Nightingale study and when we might hear intermediate data? A: Marc Stapley (CEO) reminded that the Nightingale study, for the peritoneonasal swab test, completed enrollment in August 2025. The company is about a year into patient follow-ups, and it will be a while before the study fully reads out. He characterized it as a longer-term growth driver, with results expected once all patients have been followed for at least one to two years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.