Veracyte, Inc. is a global diagnostics company that provides clinicians with tests to diagnose cancer. The company's tests are used by clinicians for diagnostic, prognostic and treatment decisions. Veracyte was incorporated in 2006 and is headquartered in South San Francisco, California, with additional operations in San Diego, California; Austin, Texas; and Marseille, France.
Business Overview
Veracyte currently offers tests in thyroid cancer (Afirma), prostate cancer (Decipher Prostate), breast cancer (Prosigna), and bladder cancer (Decipher Bladder). The company's Percepta Nasal Swab test is being run in its CLIA-certified lab in support of clinical studies, and its test for lymphoma is in development as a companion diagnostic. Veracyte serves global markets with two complementary models - offering laboratory developed tests (LDTs) through its centralized, CLIA-certified laboratories in the United States, and providing its Prosigna test to patients through distribution to laboratories and hospitals that can perform the tests locally as an in-vitro diagnostic (IVD) test.
Financials
In fiscal year 2023, Veracyte reported annual revenue of $361.1 million and a net loss of $74.4 million. The company generated annual operating cash flow of $44.2 million and free cash flow of $34.3 million.
For the first quarter of 2024, Veracyte reported revenue of $96.8 million, up 17% year-over-year. Testing revenue grew 25% to $90.3 million, driven by strong performance in the company's Decipher Prostate and Afirma tests. Product revenue was $3.5 million, down 9% year-over-year, while biopharmaceutical and other revenue declined 51% to $3.0 million.
The company's non-GAAP gross margin was 68% in Q1 2024, down slightly from 68.7% in the prior year period. Non-GAAP operating expenses, excluding cost of revenue, increased 6% year-over-year to $61.6 million. Veracyte reported a GAAP net loss of $1.9 million for the quarter.
Liquidity
As of March 31, 2024, Veracyte had $209.2 million in cash and cash equivalents. The company used $9.0 million in cash from operations during the first quarter and ended the period with $210.3 million in total cash, cash equivalents and restricted cash. Veracyte has raised its full-year 2024 revenue guidance to $402 million to $410 million, up from the prior range of $394 million to $402 million. The company also increased its 2024 year-end cash guidance to $236 million to $240 million.
Growth Drivers
Veracyte's key growth drivers include continued penetration and market share gains for its Afirma and Decipher Prostate tests, global expansion through its IVD strategy, solving new cancer challenges through its Percepta Nasal Swab test, and expanding its offerings across the patient journey through the acquisition of C2i Genomics and its minimal residual disease (MRD) detection capabilities.
Afirma and Decipher Prostate Tests
In the first quarter of 2024, Veracyte delivered approximately 14,000 Afirma tests, up 14% year-over-year, and 16,500 Decipher Prostate tests, a new quarterly volume record. The company believes it can achieve 80% penetration in both the thyroid and prostate cancer testing markets over the next several years, driven by continued market share gains and ASP improvements.
The updated NCCN guidelines, which now include a separate table summarizing treatment implications based on both NCCN risk classification and Decipher score, are expected to be a meaningful catalyst for broader awareness and adoption of the Decipher Prostate test. Veracyte also recently signed a contract with a major commercial payer to make Decipher Prostate an in-network offering for its 30 million members.
Global Expansion through IVD Strategy
Veracyte is focused on expanding its reach globally through the development of its products on multiple IVD platforms. The company is currently working on adapting its Decipher Prostate test for qPCR and its Prosigna and Percepta Nasal Swab tests for NGS platforms. This will enable Veracyte to offer its tests to laboratories and hospitals internationally that can perform the tests locally.
Solving New Cancer Challenges
Veracyte's Percepta Nasal Swab test, which is being evaluated in the NIGHTINGALE clinical study, represents an opportunity to address early lung cancer detection. While enrollment in the NIGHTINGALE study has been slower than initially expected, the company remains confident in the commercial potential of the Percepta Nasal Swab test.
Expanding the Patient Journey through MRD
Veracyte's acquisition of C2i Genomics in 2024 has provided the company with a novel whole genome sequencing-based approach to MRD detection. Veracyte plans to launch its first MRD test for muscle-invasive bladder cancer in the first half of 2026, and is excited about the potential to expand its MRD offerings to other indications over time.
Risks and Challenges
Veracyte faces several risks and challenges, including: - Continued adoption and reimbursement for its molecular diagnostic portfolio of tests - Expanding its platform and operations internationally - Attracting and retaining key talent - Developing and enhancing its diagnostic platform and operations - Marketing and selling its products effectively - Enhancing its infrastructure to support growth - Navigating the regulatory environment for its diagnostic tests
Conclusion
Veracyte is a leading global diagnostics company with a strong portfolio of molecular tests that address critical unmet needs in cancer diagnosis and management. The company's focus on driving adoption and reimbursement for its Afirma and Decipher Prostate tests, expanding globally through its IVD strategy, solving new cancer challenges, and leveraging its MRD capabilities position it for continued growth and value creation. With a solid financial foundation, including $209.2 million in cash as of March 31, 2024, Veracyte is well-equipped to execute on its strategic priorities and capitalize on the significant market opportunities ahead.