Veracyte Inc

NASDAQ:VCYT

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon, ladies and gentlemen, and welcome to Veracyte’s First Quarter 2021 Financial Results Conference Call. As a reminder, today’s conference call is being recorded. I’d now like to turn the conference over to Tracy Morris, Veracyte’s Vice President of Corporate Communications and Investor Relations. You may begin.

[Tracy Morris]

Thank you, Nika. Good afternoon, everyone and thanks for joining us today for a discussion of our first quarter 2021 financial results.

With me today are Bonnie Anderson, Veracyte’s Chairman and Chief Executive Officer and Jane Alley, our Acting Chief Financial Officer. We are also fortunate to have our Incoming Chief Executive Officer, Marc Stapley, on the call.

Before we begin, I would 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 include those regarding the transition of our Chief Executive Officer role and our projections for full year 2021 financial performance as well as our future plans, prospects and strategies, financial goals, product attributes, launch plans and pipeline, drivers of growth, expectations regarding reimbursement and other statements that are not historical fact. It also includes statements regarding the potential impacts to our business resulting from the COVID-19 pandemic anticipated timing of the launches of new products, availability of our tests internationally and our total addressable market. Management’s assumptions, expectations and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results and/or performance to differ materially from any future results, performance or achievements discussed in or implied by such forward-looking statements and the company can give no assurance that they will prove to be correct and will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. Please refer to the company’s press releases dated May 10, 2021, and the risk factors included in the company’s filings with the Securities and Exchange Commission for a discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements.

Prior to this call, we published releases announcing our first quarter 2021 results and the execution of our CEO-succession plan through which Bonnie Anderson, our current Chairman and Chief Executive Officer, will assume the role of Executive Chairman. And Marc Stapley will become CEO. Both of these announcements are available on our website at veracyte.com under press releases in the Investor Relations section. We also published the business and financial presentation, which we will reference during our remarks. The presentation is also available on our website under Events and Presentations in the Investor Relations section.

I will now turn the call over to Bonnie Anderson, Veracyte’s Chairman and CEO.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thanks, Tracy and thanks everyone for joining us today. Before we get into the strong progress we made in the first quarter, I will begin with the CEO succession plan that we announced a few minutes ago. I am delighted to introduce Marc Stapley as Veracyte’s new Chief Executive Officer to succeed me effective June 1, at which point I will transition to the active role of Executive Chairman of the Board. As a Founding CEO who has invested so much into Veracyte, I couldn’t be happier with the timing and circumstances of this leadership succession.

First, the Board and I are extremely pleased that Marc will be taking the reins as CEO of Veracyte. He is the right leader with the right experience to take over at this important stage in Veracyte’s growth. Marc shares my vision for Veracyte and is aligned with our mission of applying the power of genomic science and technology to best serve patients by asking the right questions and providing answers that give a clear path forward. He is a seasoned global executive with highly relevant industry experience from his time at Illumina and Helix. He brings an ideal mix of strategic, operational and financial acumen, combined with a proven track record.

Over his career, he has built and led complex global operations including both centralized labs as well as the instrument and reagent chip business, which aligns with Veracyte’s strategic growth plan. He also has extensive experience integrating acquisitions. Lastly, I believe Marc will be an excellent cultural fit at Veracyte. He is a result-oriented leader with the ability to lead and motivate teams around a culture of high-performance and high integrity. Second, we believe that Veracyte is well positioned for success with a powerful strategic global vision, and the table is set to execute on this vision and continue our growth in the $50 billion plus long-term global market for our genomic diagnostic tests. The company is operating from a position of strength with a strong track record of execution and significant growth opportunities. And third, the succession fits with my time line for transitioning out of the CEO role, which is something I have been discussing with the Board for about a year. I am excited and committed to continue serving the company and to be a trusted adviser to Marc in my new role as an active Executive Chair. In this role, I will be intimately involved in ongoing strategy and business development. I will be Marc’s strongest advocate and ally. And I look forward to partnering with him to guide Veracyte to achieve its full potential.

On a personal note, I am grateful to the Board, our executive leadership team and Veracyte’s employees for their commitment and dedication to our mission and the health care providers and patients we serve. It is gratifying that together, we have built a global enterprise with market-leading tests that are transforming patient care in a range of cancers and other diseases. I am as optimistic ever about Veracyte, where we are going and what we can achieve.

And with that, I am thrilled to have Marc with us on the call today to introduce himself to you directly. Marc, please go ahead.

[Marc Stapley, Incoming Chief Executive Officer]

Thank you, Bonnie and good afternoon everyone. I appreciate the warm welcome and the faith that you and the Board have placed in me to lead Veracyte through this next phase of growth. As Bonnie said, I share her vision for Veracyte and I am passionate about improving outcomes for patients all over the world at every step of their difficult journey. I am incredibly excited to join a company that has such an excellent reputation and track record for bringing highly differentiated and clinically impactful test to market. Importantly, Veracyte’s ability to bring these tests to patients through both a central lab and distributed kit model creates an exciting global opportunity. In the near-term, we have multiple ways to expand and grow, and over the long-term, our deep clinical diagnostic expertise provides a strong foundation from which to expand to other opportunities.

Joining Veracyte is a compelling continuation of my career in applying genomics to help patients. At Illumina, I solidified my belief in the power of broad accessibility to genomics, and we achieved incredible global scale enabling the entire industry. At Helix, we have been focused on using genomics to identify people with previous positions to cancer in other diseases as well as providing clinical diagnostic results to millions of people during the pandemic. And with the Veracyte team, I will now be driving the utility of genomics one step closer to patients by bringing to market innovative clinical tests, to diagnosis and treatment.

Being able to continue to partner with Bonnie and her new position as executive chair was a key element for me wanting to take on this role. Our deep industry expertise and strategic vision are incredible assets to me and the company. Bonnie has created a wonderful business over the last 14 years, and I intend to take full advantage of this opportunity to execute and build upon her vision. I would like to thank you, Bonnie, for entrusting me with Veracyte. Over the coming months, I plan to dedicate time with key stakeholders, the Board, the executive leadership team, Veracyte’s talented employees and the company’s analysts and investors. I look forward to meeting many of you in the near future.

And with that, I will turn the call back over to Bonnie.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thank you, Marc. I could not be more excited to partner with you as you pick up the torch and continue taking Veracyte to where we aspire to go. And with the strong performance and progress in the first quarter of 2021, we are well on our way.

Turning to our first quarter performance, we delivered solid results with especially robust momentum in March as COVID vaccination rates increased across the country and physician practices continue to open up. Our total revenue for the first quarter was $36.7 million, an 18% increase over the first quarter of 2020. And our genomic testing and product volume was 14,437 tests in the quarter, an increase of 11% over prior year. With these solid results, we are reiterating our 2021 full year total revenue guidance of $190 million to $200 million. We are thrilled to complete our acquisition of Decipher Biosciences on March 12 and welcome their top notch team to the Veracyte family. The integration is going really well. And our teams are already collaborating and learning from each other. The Decipher business expands our reach into 7 of the Top 10 cancers in the United States and is already contributing strong revenue with its prostate cancer test, which continues to gain commercial traction. We also made great progress in advancing our pipeline and are on track to launch 3 new products in pulmonology in the second half of the year. These include our novel noninvasive Percepta nasal swab test, which we believe is going to be a game changer in early lung cancer detection, potentially enabling more lives to be saved. We are excited to unveil pivotal clinical validation data for the test at the upcoming ASCO annual meeting prior to its planned launch in the second half of the year.

Now let’s review key highlights for the first quarter. I’ll start with commercial growth, our first measure of success. Our genomic testing and product revenue was $36.1 million, an increase of 19% over the first quarter of 2020. The primary driver of the growth was the addition of the Decipher prostate volume. Excluding Decipher, our revenue grew 6% to $32.9 million, driven primarily by our Afirma franchise in thyroid cancer. Afirma is leading our pandemic recovery among our legacy tests with physician offices increasingly accessible to patients as well as our sales reps. Office-based physicians represented about 50% of our Afirma volume and the vast majority of our urologic cancer business, in fact, in March of 2021, we experienced all-time monthly highs in the number of unique ordering physicians for both Afirma and Decipher prostate testing with nearly 2,400 and over 1,000 physicians, respectively.

Our Afirma business continues to gain momentum as the new standard of care in thyroid nodule evaluation with adoption for the franchise further fueled by physician interest in our expression Atlas to provide comprehensive genomic profiling information on cancerous thyroid modules at the time of diagnosis. We believe our decipher franchise continues to be well positioned for long-term growth as we offer what we believe is the best product and most extensively validated genomic biomarker in the prostate cancer space. We also are benefiting from new Medicare coverage decisions for expanded indications in late 2020 and including for high and very high-risk indications that allow our sales reps to target a new physician call point, the over 5,000 radiation oncologists practicing in the United States.

On the pulmonology side, our Percepta and Envisia business continues to rebound, although at a slower pace, with the pandemic still limiting the number of being performed. As evidenced, our claims analysis research shows that overall bronchoscopy volumes are at 50% pre-pandemic levels. Here too, though, we saw significant test volume increases in March compared to January and February. In addition to gaining increased physician access to our customers, we are continuing to grow our use of digital engagement tools, a highly effective marketing approach that we learned during the pandemic. Our efforts here include a number of peer-to-peer webinar series featuring leading KOLs, discussing their use of our products and sponsored participation in active online physician communities as well as targeted online marketing that drove more than 200,000 visits to our product websites in the first quarter, an all-time high.

We also made significant progress in pipeline advancement, which will expand the breadth and depth of our offering as well as our global reach. We are especially excited to unveil pivotal clinical validation data for our Percepta nasal swab test in lung cancer in conjunction with the upcoming ASCO annual meeting, which will be held virtually in June. We believe our nasal swab test is going to bring much needed clarity to early cancer detection, where today, physicians lack objective tools to determine which patients with potentially cancerous lung nodules found on CT need further evaluation, and which can safely be directed to routine monitoring. The need for a better tool is especially important in the wake of new U.S. preventative service task force recommendations that now expand the number of people eligible for annual lung cancer CT screening to an estimated 15 million.

We are on track to launch our nasal swab test in the second half of 2021, at which point, we will make it available to a select number of sites through an early access program as we amass the clinical utility evidence needed to obtain Medicare coverage. Moreover, we plan to adapt the nasal swab test to the nCounter analysis system in 2022, which we believe will enable us to begin accessing an approximately $8 billion global market for our lung cancer franchise. We have also advanced our Percepta Genomic Atlas, which will provide physicians with comprehensive genomic profiling information for a patient’s lung cancer tumor enabling us to inform treatment decisions using the same tiny biopsy from a bronchoscopy or a transthoracic natal aspiration that was used in diagnosis. Currently, this information is typically provided later in the workup process, which often leads to inappropriate or delayed treatment. We will share new data on the Perceptive Genomic Atlas at the upcoming American Thoracic Society, or ATS, and American Society of Clinical Oncology, or ASCO, annual meetings and plan to commercially introduce the test in the fourth quarter of 2021 as part of our comprehensive lung cancer portfolio.

We also advanced the development of our Envisia classifier on the nCounter analysis system. When launched later this year, this test will enable us to help inform or help improve the diagnosis and prognosis of interstitial lung diseases for patients in global markets. We plan to unveil performance data for the test on the nCounter instrument at the ATS conference and look forward to submitting the test for CE Mark in Europe by the end of the year. We’ve initiated market shaping activities focused on identifying and engaging with KOLs in target countries regarding clinical utility studies to support local market access decisions. We have also made key hires in our market access and medical functions to support our efforts. We are leveraging our current installed base and customers for the initial launch to help secure fast market access. Additionally, in support of our global growth strategy, we initiated the development of our Veracyte-branded diagnostics-only nCounter platform, which we had anticipated at the time of our transaction with NanoString and which has become more timely with our planned menu expansion on the system.

I will next focus on evidence development, where we also made significant progress during the quarter. We are excited that 6 abstracts for our genomic testing in lung, prostate and thyroid cancers have been accepted for presentations at ASCO. In addition to data for our lung cancer portfolio products, these include a podium presentation for data from our participation in the VANDAAM study which is a prospective validation of the Decipher prostate test in African-American men and shows the inadequacy of clinical classification risk alone and the subsequent need for genomics. Our continued partnership with many academic institutions and participation in key worldwide clinical trials, along with our publication track record, will continue to deepen our leadership in prostate cancer over the long-term.

We also plan to share new data at ASCO demonstrating our Afirma Xpression Atlas’ ability to identify comprehensive genomic alterations in thyroid fine needle aspiration samples. This information may form in-treatment decisions at the time of diagnosis regarding new targeted Thyroid cancer treatments that are available or in development. We also have a significant presence at the ATS conference later this week, where in addition to the pipeline focused data I mentioned earlier, four abstracts will be presented, showing robust performance data for our Envisia classifier. We are pleased to see leading institutions such as UCLA begin to report data regarding their own experience with the test.

Finally, at the European Society of Medical Oncology, or ESMO Breast Cancer Conference, also this month we are excited about the presentation of initial findings and consensus from the first wave of PROCURE. This European study utilizes Delphi methodology to generate consensus on the clinical utility of genomic tests, including Prosigna. You will recall that this study is led by an independent scientific committee of breast cancer experts and includes input from over 140 breast cancer clinicians practicing throughout Europe. Also related to Prosigna, data from a prospective study, evaluating the influence of the PAM50 gene signature on therapeutic decision-making for patients with early-stage breast cancer, are being presented at the ESMO breast cancer meeting. The PAM50 signature is the foundation of our Prosigna assay.

With those insights, I will now turn to a more detailed review of our first quarter 2021 financials. I will refer to our business and financial presentation, which Tracy mentioned earlier and which is available on our website. My prepared remarks until now address the first quarter 2021 key takeaways as well as the other content that is on Slide 3 through 8. I will begin the financial review with Slide 9, which reflects our top line full year total revenue expectations of approximately $190 billion to $200 billion, representing growth of approximately 65% over 2020 at the midpoint of the range.

Turning to Slide 10, specifically, the right hand column of the slide, we generated $36.7 million in first quarter 2021 total revenue, an increase of 18% over the prior quarter – prior year quarter. We closed the Decipher Biosciences acquisition on March 12, and consequently, our testing revenue of $33.1 million includes $3.8 million in urology revenue for the period March 12 and through March 31 of 2021. We expect to file our Form 10-Q today, which includes further detail on the acquisition.

Turning to Slide 11 and our reported volume per quarter, we reported 14,437 tests across our portfolio in the first quarter of 2021, an increase of 11% over the prior year quarter. This includes 1,560 urology tests from Decipher for March 12 through 31. And excluding the urology test, genomic testing volume for Afirma, Envisia and the Percepta GSC was 10,743, an increase of 2% compared to the first quarter of 2020. Our first quarter product volume of 2,134 Prosigna tests represents a 12% sequential quarter increase, but a 14% decline over the first quarter of 2020, which had been a record quarter for Prosigna test volume following our acquisition.

Slide 12 shows our performance against six key performance indicators for the first quarter of 2021 compared to the prior year period. We incurred $35.1 million into Decipher Biosciences acquisition-related costs, which we recorded in general and administrative expenses. These expenses include $10 million in transaction expense, including banking and legal fees, and $25.1 million in nonrecurring post combination expense related to the acceleration in cash settlement of unvested historical Decipher stock awards.

Slide 13 digs a level deeper into the total revenue, breaking down testing, product and biopharma and collaboration revenue. The results are shown against the prior year period. I will point out that for the first quarter of 2021 average testing and product revenue per reported test was approximately $2,500, which marked a 7% increase from the first quarter of 2020. Slide 14 and 15 provided revenue and volume trends sequential and year-over-year. Slide 16 shows our cost of revenue in absolute dollars as well as our gross margins with and without biopharma and collaboration revenue. Gross margins remain in the mid 60% range.

Slide 17 shows our operating expenses in absolute dollars and as a percent of revenue. In the first quarter of 2021, our operating expenses included the $35.1 million in Decipher acquisition-related expenses. Excluding acquisition-related expenses, our operating expenses were $34.6 million for the quarter. The sequential increase is principally from an increase in sales and marketing expenses. With the acquisition of Decipher, we would expect our quarterly operating expenses to be in the following ranges for the remainder of this year. R&D expense at $8 million to $10 million per quarter, sales and marketing to ramp from $22 million in the second quarter to $24 million to $25 million, by the fourth quarter, G&A to range from $14 million to $16 million per quarter, excluding any nonrecurring or onetime items and intangible asset amortization of $3.50 to $4 million per quarter.

Slides 18 to 19 show trends in our net loss and cash flow from operations as I mentioned earlier, we incurred $35.1 million in acquisition-related expenses in the first quarter of 2021, which we recorded in general and administrative expenses. We paid these expenses in the first quarter, reducing our cash flow from operations.

As shown on Slide 20, on March 31, 2021, after paying for Decipher and all associated acquisition costs, we ended the quarter with $324 million of cash on hand and no material interest-bearing debt outstanding.

In closing, I would like to thank Keith Kennedy for his many contributions to Veracyte during his 4-year tenure with the company. He played an important role in our progress including building a strong financial infrastructure and team, which we believe will help ensure our continued success. We wish him the best in his next chapter.

Looking forward, I believe our robust progress so far in 2021 reflects the strong foundation that we have built to date. We are fortunate that Marc will be joining as our new CEO to build upon the powerful strategic global vision that is the backbone of this success, improving outcomes for patients all over the world at every step of their journey in cancer and other diseases. With the acquisition of Deliver and the exclusive access to the nCounter analysis system for diagnostics, the table is set for us to execute on our next phase of growth. And we are well positioned to continue our penetration into the estimated $50 billion-plus long-term market for our tests. I am excited for what is next for Veracyte and fully committed to supporting Marc as he leads the company forward.

And with that, I will now ask the operator to open the call for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Puneet Souda from SVB Leerink. Your line is now open.

[Puneet Souda, SVB Leerink]

Yes, hi, thanks Bonnie and Marc, but congrats on – great having you on board. And Bonnie, we will really miss working directly with you. It’s been a great journey with – for Veracyte so far.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thank you, Puneet.

[Puneet Souda, SVB Leerink]

Thanks guys. So first of all, Marc, I mean you have led large population studies. You have been close to genomics for a long time. A lot of Veracyte has done is build clinical evidence over the years to drive adoption of these tests in important markets such as Afirma. So, one question for you, as you look at the Veracyte’s current position in the market, given sort of your experience with population study, the largest studies, where do you see opportunities in the portfolio? And maybe just Veracyte’s nCounter efforts are to drive adoption of this test broadly across the globe, but you have obviously been somebody who is very close to sequencing. So, tell us how do you view this opportunity and the use of nCounter versus sequencing? Thank you.

[Marc Stapley, Incoming Chief Executive Officer]

Yes. I am happy to answer that and anyone else can jump in as well. But from my standpoint, I mean, Veracyte has always done an amazing job of addressing some really key markets in oncology in particular, with – so obviously, now with the recent acquisition of Decipher, 7 of the top 10 cancers are covered. So, the way I look at it now is there is a lot of execution on that strategy that’s already been set and those markets that are very significant, as Bonnie just mentioned, potentially $50 billion plus in the long-term. But I still think there is always more breadth. We can expand indications. We can expand geographically. We can expand across different disease areas. And so I have always viewed the power of genomics as being incredibly broad and vast and look forward to working with the Veracyte team to achieve that in the company. With respect to sequencing and the nCounter platform, I think the platform itself is one of the key facets for me of Veracyte in the strategy that Bonnie and the team, has executed on. I think that was an excellent move and it really does give the company tremendous opportunity to go broadly and geographically. As far as differences to sequencing, I mean, as you mentioned, it’s a lot about the clinical evidence and the data. And there are multiple ways to get after that. And the approach that Veracyte has taken with gathering huge amounts of data, I think is incredibly differentiating and I am very excited about it.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Yes. And I will just add to that, I think just to remind everybody that’s listening. We have a two-pronged strategy for reaching this $50 billion market and sequencing our whole RNA transcriptome sequencing is the backbone of what we do today to discover, to develop and to validate really high-performing tests that patients and doctors can make clinical decisions on and bank on that performance. We also build incredible bio-repositories out of all of the whole transcriptome and see what sequencing work we do. And we believe continuing to serve the very large U.S. marketplace through our CLIA lab is absolutely the right approach. We also believed a couple of years ago, and continue to believe today, that the right approach for the international market is distributed testing. So when we took on this two business model approach, it’s because we want the best solution for each market situation. And that’s what we will be executing on. And Marc has a terrific background with both sequencing and products to be able to lead that.

[Puneet Souda, SVB Leerink]

That’s great. Thanks for that, Bonnie. If I could briefly touch on – I am not sure if the Decipher number for the full quarter was provided – and maybe you did and I didn’t catch that so if you could clarify it? It was really strong in the last 2 weeks I wanted to get that number. And then also, what percent of reps are actually in person today? I think you gave a 50% number. So, just wanted to make sure that number was correct for Afirma and Percepta? Thank you and I will hop back into the queue.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Okay, yes, we recorded $3.8 million of revenue in the period from March 12 to the end of the quarter and 1,560 tests. March was a month of momentum across both our legacy business as well as the Decipher business. So I wouldn’t take a few weeks of revenue times the number of weeks in the quarter by any stretch. In terms of number of reps, we now have, together with Decipher, over 175 reps in the field. We will continue to invest in sales expansion on the back of our bladder cancer test, which we expect to get a final Medicare coverage decision later this year. And as we bring our nasal swab test and Percepta Atlas to market in the U.S. and potentially a couple more positions as we launch Envisia and nCounter in international markets. So not huge increases through the end of the year, but we will continue to make those investments to keep up with all the great product pipeline advancements. Next question?

[Operator]

Your next question comes from the line of Brian Weinstein from William Blair. Your line is now open.

[Brian Weinstein, William Blair]

Hey guys. Thanks for taking the questions. Congrats to Marc and Bonnie and Keith – certainly, Keith, if you’re in the room or not, l don’t know. I’m saddened to see you both moving on. And that’s really kind of the first question, Bonnie, for you, which is I mean you’ve had a team that’s been together for a while. We’ve now seen a pretty meaningful turnover at the top between you, Keith and John, all sort of now moving on all the time on the strategy. It’s really starting to come together and now is the point where you start to realize the benefits of what that vision has been for many years. So can you help balance that positive outlook and the opportunities with the transition of many of the key leaders here, all within a couple of months of one another.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Well, Brian, I would say, we have been executing on a really big idea and a really bold vision and strategy over the last 18 months. And we’ve always known that the company, as it has over the 14 years. I’ve been at the helm, we’ve gone through several iterations of evolution, and that always happens. But the key is, as those changes are made, that we use it as opportunity and elevate and attract and continue to evolve the structure. For example, we are really pleased to have Tina Nova, who’s on the call with us today, joined us as part of our acquisition with her very talented team down in San Diego, who are also playing key roles across other aspects of the business. Tina is now the General Manager of our Decipher and our Afirma franchise, leading the business, the two top revenue-generating products for the business. And we’re thrilled and excited to have Tina on board doing that. You also might recall, we added another very senior executive to the staff beginning on January of this year. Morten Frost joined us from a leadership position at Agilent where he had built significant growth across the globe in diagnostic and pathology-type businesses. In fact, his team was part of a success story with the CDx with KEYTRUDA. So he brings a remarkable and very relevant experience to the table. Morten has added some people to his team and is leading the pulmonology franchise, one requiring incredible strategic leadership as well. So we have said goodbye to a few folks. But we have also strengthened as well the top of the company. We’re now aligned around our general manager structure which gives us top to bottom clinical expertise in each of the clinical verticals that we’re in. We think that was another very important move. And as we move forward with expanding menu and expanding toward the global potential of our nCounter and product business, it was important that we strengthen the company with people that bring that kind of expertise as well to the table. So I’m thrilled. I think the timing is right because the table is well set. And while there is many other things we can do strategically as Marc gets his hands on the wheel, just executing well as we go through these next few years. Is going to be very differentiating for Veracyte. And I plan to be at Marc’s side in the Executive Chairman role, which will be an active role, helping to drive that success.

[Brian Weinstein, William Blair]

Okay. Thank you for that. Moving just to kind of the more near-term stuff here with the data that’s going to be published as part of abstracts coming up for ASCO, and then at ASCO specifically, on the nasal swab classifier. Bonnie, can you just level set us on what type of data do you think is necessary here for commercial viability utilization reimbursement? Do you have any idea kind of where the bar needs to be set when we try and evaluate what this data is. Obviously, you’re not going to tell us what it is. But where is the bar for kind of commercial success? Do you have any idea on that?

[Bonnie Anderson, Chairman and Chief Executive Officer]

Well, we have a very clear idea on that. We have spent a number of years honing in on what is needed to have success in that space. And I think our clarity is we need to do two things: We need to be able to develop and launch a test that’s very high-performing in ruling out cancer or classifying patients as low risk. Those patients, we hope, we will be able to be classified and avoid any work up. The economic benefit and value of that will be part of the clinical utility of our test. On the other side are the patients with suspicious nodules that likely have cancer. For that part of the 2-class cutoff, we need very high-performing tests when it comes to specificity so that we don’t put too many benign patients into that workup bucket. Guidelines direct care today, it will be important that our tests line up with those guidelines, which would require it to be a very high-performing classifier, and the value of getting patients diagnosed quicker and on treatment quicker will be part of the additional economic value that will be assessed to prove the real clinical utility of our nasal swab test. And I can tell you, we have got quite an exciting group of KOLs, Giulia and her team have been preparing for the data unveiling and working with a lot of the thought leaders that have been very actively involved in the program, and we’re very excited about the nasal swab test.

[Brian Weinstein, William Blair]

Thank you very much.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thank you.

[Operator]

Your next question comes from the line of Sung Ji Nam from BTIG. Your line is now open.

[Sung Ji Nam, BTIG]

Hi. Thanks for taking the questions. Congratulations to Marc. Welcome aboard. And also congratulations, Bonnie and pleased to hear that you’ll be in your current – in your new role for a very long time. So, just starting with a clarification question, the Percepta nasal swab test, has the classifier been locked in? It sounds like it has been. So the data being presented is based on kind of the locked in classifier?

[Bonnie Andersonb]

Yes. Well, I don’t – Giulia Kennedy is here in the room with us. And why don’t I let her provide a little bit of a summary on what work has been going on since we had R&D Day. Giulia?

[Giulia Kennedy, Chief Scientific and Medical Officer]

Sure. Since we had R&D Day, we continue to do more development work on candidate classifiers. And since then, we have locked them and put them through a validation, a pre-specified validation plan, and now have a winner, if you will, and that data will be presented at ASCO. So yes, it’s locked and validated.

[Sung Ji Nam, BTIG]

Fantastic. Also great to hear the physician practices, reopening, recovering and was kind of curious, given we’re hearing that there is been a lot of delays in terms of diagnosis of cancer, screening of cancer last year, and it may feel a bit too early to tell. But are you kind of seeing any kind of trends that – any different trends as the – if physician offices are reopening or getting more station volumes in terms of later stage diagnosis or whatever else?

[Bonnie Anderson, Chairman and Chief Executive Officer]

Yes. We do. Well, in fact, I’ll ask Tina to speak up here in a moment and give a little bit of a backdrop on what you’re seeing in the – in her businesses. But certainly, the physician office accessibility is happening. As I said in prepared remarks, the pulmonology space is still a little tighter mostly because we are still seeing the COVID impact there of pulmonologists simply being the doctors still working there with COVID on patients, but also the procedures that they are performing has not yet completely rebounded because of the in-hospital status. But Tina, why don’t you walk through you of the two top revenue-generating products and have been keeping a close eye on a sales rep access. Why don’t you give us a summary?

[Tina Nova, General Manager, Thyroid & Urology]

Right. Sure. So on the prostate side, it was amazing that at the beginning of the year, the American cancer society came out with a number that said they estimated that there would be 248,500 new cases of prostate cancer diagnosed in the United States in 2021, and that represents a 29% increase over 2020, which is quite substantial. So they didn’t specifically make a comment about COVID, but there is certainly been a lot of articles written that point to that, knowing that a lot of people did not go to their primary care physicians where a lot of these cancers are initially detected before they are sent to specialists in 2020 because of COVID. And also, I have heard from physicians while I’m out in the field that there is, especially with older patients, there is still a lot of reluctance to leave home and to go to a hospital or go to a physician’s office, even with conditions today. The Decipher prostate market actually has recovered quite nicely in the last quarter as far as COVID goes. I would say about 80% of our offices are completely open and accessible for our sales reps. Different parts of the country are different. And the Afirma for the thyroid is a little lower than that. It ranges between about 60% and 70% of offices are accessible to sales reps, so just slightly lower. And of course, on the pulmonology side, which is not my expertise, but they see even lower because a lot of those positions, as you would expect, are treating COVID patients. So it’s still not open 100%. We still see variability, and we also see variability in geographic area.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thanks, Tina. And yes, we’re encouraged, but certainly, COVID’s impact hasn’t completely gone away yet. Next question?

[Operator]

Your next question comes from the line of Tejas Savant from Morgan Stanley. Your line is now open.

[Unidentified Analyst]

Well, this is [indiscernible] on for Tejas. Thank you for taking our question. For the validation data for nasal risk, would you remind us of the enrollment criteria for that study? And what are the potential differences between the population study in this upcoming data presentation at ASCO compared to the population included at CHEST ‘19?

[Bonnie Anderson, Chairman and Chief Executive Officer]

Sure. I’ll be happy to ask Giulia to speak to that. The work that we did earlier that was part of the unveiling of the R&D Day, we’ve been able to expand that cohort. But Giulia, you want to talk through that?

[Giulia Kennedy, Chief Scientific and Medical Officer]

Yes. So in 2019, in CHEST, we had a single cohort prospectively collected and that enabled us to provide a proof of principal classifier, and you remember those results. And then in the R&D day back in December, we have presented some data on a variety of candidate classifiers that used that cohort plus an additional cohort that had different properties to it to enable us to create a spectrum of cases to train the classifiers so that it could recognize a variety of cancers for different populations from different sites, different nodule sizes, different subtypes and whatnot to provide as much diversity as possible in the training set. And at that time, we also locked away an independent test set with similarly diverse characteristics, and that is the set that we unlocked in our validation, and we will be providing more color as to the data at the ASCO meeting in June.

[Bonnie Anderson, Chairman and Chief Executive Officer]

Thanks, Giulia. We began getting access to these nasal cohorts that were collected back with our acquisition of Allegro. When we announced our collaboration with J&J in early ‘18, we announced that part of the big value of that collaboration was access to additional cohorts. And although it will build for future, we’ve also invested in the NOBLE study, which will be a cohort that we’re investing in for future development in lung cancer; hopefully, allowing us to even go further upstream and tap an even bigger market opportunity in lung cancer. So all-in in lung cancer, we’re excited about ASCO and look forward to bringing the nasal swab to market.

[Unidentified Analyst]

Great. Thank you so much for the color. And then just as a quick follow-up. Will we see a preview of the headline results in the ASCO abstract coming up next week?

[Bonnie Anderson, Chairman and Chief Executive Officer]

Yes. We will be sharing. There will be a pre-sharing of data because of the way ASCO has lined up the release of information in abstract. So yes, you will get a preview of that.

[Unidentified Analyst]

Thank you.

[Bonnie Anderson, Chairman and Chief Executive Officer]

[indiscernible], thank you for joining.

[Operator]

Your last question comes from the line of Mike Matson from Needham & Co. Your line is now open.

[Mike Matson, Needham & Co.]

Hi. Thanks for taking my questions. I guess I wanted to start with the guidance and kind of what the first quarter applies to the rest of the year. So if we take the midpoint of the revenue guidance, this would be about $195 million. And I think on the fourth quarter call, you said that there was about $48 million in there for Decipher. And I don’t think that included this roughly $4 million that you got in the first quarter. So that’s about $52 million for Decipher. If I deduct that out, that implies about 22% growth for the organic growth for the base business, excluding Decipher, you just grew about 6% organically. So are you comfortable you can get that growth and/or the Decipher will do better than that 52 million kind of range?

[Bonnie Anderson, Chairman and Chief Executive Officer]

Yes, thanks for the call, Mike. And yes, we are reiterating and affirming our guidance, $190 million to $200 million. And we’re very confident that we will get there. I think we will have various levels of performance across the whole portfolio, but we’re very confident in that guidance. Thank you.

[Mike Matson, Needham & Co.]

Okay, alright. And then just wondering if you could give us the pulmonary and biopharma sales for the quarter, first quarter?

[Bonnie Andersonb]

Yes. So we – I don’t think – believe we broke the pulmonary spot out, but the biopharma revenue was – do you have that handy? The biopharma and collaboration revenue for the first quarter is on Page 13 of the slide deck. Break that out, it was $566 million. That’s a lumpy revenue base. A lot of that’s coming from our longer term collaborations. And that’s where that was.

[Mike Matson, Needham & Co.]

Okay.

[Bonnie Andersonb]

The pulmonary products line up under our testing revenues and the only associated products within the product area that we pull out would be Prosigna and associated instruments out there. Thank you.

[Mike Matson, Needham & Co.]

Yes. Alright, yes.

[Operator]

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