STIFEL 2026 HEALTHCARE CONFERENCE - BILLIONTOONE INC

Okay, welcome back to the 2026 Stiefel Healthcare Conference. We are back on the public side. Happy to have Billion to One, CEO Oguzhan Atay is with us today. Oguzan, thanks very much for spending some time with us here. Thank you for inviting me. Sure. Okay, let's talk a little bit about the business. There are two sides to it. There is a prenatal business and there's an oncology business. Maybe we'll start with the oncology. You have a Northstar Select assay and you have a Nordstar Response assay. Those are your two commercial products. They do exist in a crowded market. Liquid biopsy is a field we've followed for a while, and to say the least, there are a lot of players in it. But your products have differentiation that seemingly are yielding a nice ramp here on the assays themselves. The biggest question I get from investors is just how do you compete in this market just given the nature of it? Maybe you can just spend a second talking about them, talking about why clinicians find them to be useful. Certainly. I think these are very crowded markets, as you said, and there are a lot of competitors that are bigger, that are spending more in these markets. But I think we have been able to show, first in prenatal, that you don't have to be spending the most to be able to be successful in a market. just have to be and you don't have to be the first comer either you just have to have much better products that you can prove to these providers that they are much better than the existing products in you know for different products this can mean something different you know. For therapy selection we have been able to show in peer reviewed studies that compared to you know incumbents that we have 50 plus percent you know higher sensitivity we can detect 50 plus percent more actionable therapies that is such a high number that it is almost unbelievable but we actually show it within these clinics as well right you know if they are currently using a particular product you know we can offer them you know why don't you use our tests you know for five patients for ten patients and to see for yourself that how big of an impact that it can have in their clinical journey and once they see it for their patients, they don't just become a user, you know, they become an advocate. I think for response monitoring, which, you know, this really means being able to detect, you know, progression, you know, significantly before scans in a tissue-free test. You know, response monitoring is an area where I think most people think of as an extension of MRD, minimal residual disease but in in many ways it is a distinct problem it's a quantitative problem where you are trying to track the tumor burden it's not a detection problem and there i think our technology is so much more powerful than anything that exists and that i think has allowed us to show that you know especially as the cancer patients you know in these late stage cancer patients you know their tumors evolve the timing is so important that you know we can not only provide better therapies for them and that once the cancer evolves and once the patient is no longer responding to therapy that they can you know use our response that to find that out but then that also can trigger for them to you know do another therapy selection test to determine what the second line therapy is going to be so there are a lot of interplays between select and response tests sometimes they start with doing response tests and then you know with the progression they start ordering select and see kind of how powerful our select test is sometimes they start with head-to-head you know pilot research that they do against you know whatever test that they might be using in their clinic see the difference select you know start with select And then they start adding response. But we, in general, see this interplay with select and response in late-stage cancers. And when we get to, you know, MRD, I think that head-to-head, again, you know, starts being very important, too. Yeah. Right? You know, we are trying to make a comment that, you know, they don't believe today. Right? We are saying that you can have a tissue-free test that is as performant as tumor-informed assays. Today, they have to make that trade-off. Do I use an easier-to-use test that is going to get me the result quickly, or do I use a test that has a much higher failure rate, that has much longer turnaround time, and rely on a tumor-informed test that has better sensitivity? What we are telling them is that you don't have to this trade-offs anymore. And in response monitoring setting, we have already shown against the most widely used tumor-informed assay that we can actually be not just on par, but more performant than a tumor- informed assay. And I think as we show that in the MRD market as well, we are going to have a significant advantage and we are gonna be able to get those providers to adopt our test. Okay, all right. So there's a pretty compelling repeat usage or at least longitudinal assessment story. It sounds like it's driven in some cases by response first. I think that's interesting that you start there and then you go to the select test. The response assay measures an epigenetic change rather than a variant, a cancer-associated variant. So in some sense, it's different than some of the response monitoring assays that are out there. Is that a distinction without a difference, so to speak? Or is that a clinically meaningful thing that you're doing versus other tests that are trying to monitor for response and resistance? I think it can be meaningful, especially if the tumor evolves and you are looking at only particular variants, you might be able to miss that evolution. Whereas when you are looking at an epigenetic change, you can look at much more broadly because those epigenetics changes happen across the epigenome, whereas the variant changes can be happening in genes that you might not even be assessing. Okay. And the confidence that clinicians will appreciate the performance difference is presumably high, because one of the things that we run into and we realize more and more every day is that the folks that are thinking about sensitivity of cancer assays most are guys like me and investors far more than clinicians. But it sounds like your point is when these clinicians sort of get into the weeds a little bit and realize what they can do for their patients, that the sensitivity advantage or the performance advantage is what ends up winning the day. I think it really depends on how big of a difference that you have. Like a 5% difference is going to be very difficult to convince a physician for. So that is why in therapy selection, we are focusing on the sensitivity difference because we can say that, you know, 50% actionable, more actionable variance is so significant that you can see the difference in just a few patients. That is not going to be the case when you go into an MRD use case. That is why we are focused there on tissue-free tests because you need to have almost a categorical difference that, it is much easier to use the tissue- free test with the performance of a tumor-informed test as opposed to kind of saying that we have a more performant tumor-informed test. I think the latter is going to be a little bit more difficult to convince physicians, especially in some of the more highly shedding cancer types. I think that starts becoming more meaningful in some of the other cancer types as MRD utilization goes from primarily CRC today to lower and lower shedding cancer types. But today, in CRC, I think that differentiation, as you said, might not be as clinically meaningful. That is why the more meaningful differentiation is that all-important ease of use. Yeah, okay. So is it fair to say that as we move out of some of these high-shedding cancers or cancers where liquid biopsy assays have just been deployed and kind of well-established that your sensitivity advantage kind of drives home a message for these clinicians that, you know, resonates in a way that maybe some of these aren't, these other ones aren't? In other words, do you think you out-kick your coverage, so to speak, in some of these lower-shedding, less-penetrated oncology markets from a tumor standpoint? I mean, especially we see that in therapy selection today, right? You know, if you look at in therapy selection, as you go to lower and lower shedding cancer types, our differentiation, our advantage becomes larger. Okay. Okay, so that's performance. Can we maybe just talk a little bit about commercial reach? I was asking you about regional penetrations and just how the sales force is reaching doctors. I think you started the year with a mid-50s number as far as the number of reps that you have and you're trying to get to 65 at the year-end provided that that target still holds are you on track for that and then the related question can just be like you know how much do you see that expansion being meaningful in the market knowing that some of these reps were are still in the process of coming up now so we we have about 65 sales representatives in oncology right now so we are certainly on track and potentially you know beyond that year and target already and we are seeing you know incredible sales efficiency you know as you know in our Q3 results we are already at 68 million annualized revenues that means that each sales rep on average is bringing in more than 1 million dollars that is without you know response Medicare coverage that is actually, as you said, with a significant number of these reps are just ramping up and not really contributing as much. So we actually see a very strong sales efficiency in oncology. And that is why our growth is actually not really determined by how many sales reps that we can add or we should add. It is that, you know, there is a natural rate at which, you know, beyond which it is very difficult to maintain the same level of service and quality. So we look at kind of, okay, if you want to maintain 100% year-over-year growth in oncology but not very significantly above that, from a test volume perspective, how many reps do We need to add every quarter to be able to grow at that level, but not much more beyond that level because growing much beyond that level can result in service quality to be not as good. And you can have the greatest test, you know, greatest product in the world. If your turnaround time is three weeks, oncologists are going to not rely on your test. I see. Okay, so there's a sweet spot in terms of the number of sales reps that you want out there. it sounds like that's somewhere in between 60 to 100 or 100 as the upper limit no i think in the near term i think it is about how many you add every quarter to maintain that growth rate that you can sustain and of course as the base grows the number of reps that you want to add per quarter needs to grow to be able to maintainthat hundred percent rate so you know that was about you know five to six representatives for 2026 that can be you know seven to eight sales representatives per quarter next year so we can continue to maintain that hundred percent year-over-year growth you know for years to come okay okay and then maybe just thinking a little bit about in network versus out of network status for tests when it comes to ordering logistics um and just you know the way in which these docs tend to to prefer some tests over others some are in networks or not where are you generally speaking when it comes to growing your in in network percentage of tests and and what kind of progress do you think you make on that in 2027. so we are about 90 percent in network and you know this becomes actually a much more important point especially in prenatal side. I think in oncology, most of the reimbursement and coverage is driven by Medicare and Medicare Advantage plans. But in pre-natal, there are a lot of managed Medicaid programs and other difficulties when you are out of network that can result in a significant headwind from a test volume growth perspective as well as ASP perspective. You know, so that is why it was so important for our, you know, prenatal to get in network. You know we talked previously about how 40% of the prenatale market is in single specialty clinics where we have done, you know, a lot of penetration in and 60% is in health systems and until this year we couldn't even get into many of these health system conversations because if you are not in network with the major insurance players in the country you don't even have a chance to become their primary test so we have the 60% of prenatal marketing health systems that we really couldn't start penetrating until this year because we didn't you know we weren't in network with all major insurance players because we weren t you know investing in Epic Aura and because we did not have the full product portfolio including the expanded panel So now that we have all the building blocks for health system penetration in prenatal, I think over long term, the 60% of the market is going to be an incredible opportunity for us to continue to grow our market share. Okay. So that makes total sense. Penetrating the health system base obviously is an objective of yours for 2027. It takes some time for those institutions to kind of get their hands around it and get on board. Do you see progressive wins over the course of 2027, or is it more by the end of the year we think we'll start putting some numbers on the board and that kind of sets you up for a 2028 volume uplift? I think it is difficult to say when exactly they are going to come in. We had about, I think, three wins in 2025. And then we had about one health system win in 2026. And those are the two data points. Now, of course, we have a lot more building blocks in place. So I think it can be one, it can be three, it be five of them. But each one being 3,000, 4,000 tests per quarter, they can be substantial additive growth that are not in our models, that are not going to be in the way that we guide for next year. So our baseline kind of growth in the independent single specialty clinics is, you know, where we are going to continue to see, you know, predictable quarter-over-quarter growth in our prenatal business, you know, continued growth in ASVs will contribute to that year-over year growth for our pre-natal businesses, but then health systems are actually going to be, I think, an upside potential and the magnitude of that, I think, still is going to be a question mark because each one is so significant that there is a big difference if we get one of them versus four of them. Yeah, for sure. Okay. You mentioned the 130 gene panel, or at least the expanded panel. It sounds like that's an important part of what you're trying to do. Is that from a clinical standpoint, the health systems feel more comfortable using it? Or I would imagine the genetic counselors also have something to say about that. Why is that product important there, if you could just spend a minute there? Yeah, I think if you think about health systems, you have to have products that speak to every single stakeholder. And, you know, we had the ease of use of our workflow and, you know, the best-in-class single gene and IPT that OBGYNs love. You know, we had the fetal antigen and IPTE that is so critical to maternal fetal medicine specialists. I mean, they see more alloimmunized patients than, you know, high-risk Down syndrome aneuploidy patients. So we had those two stakeholders that have been pushing for, you know, our adoption in health systems. But, you, know, not only we didn't have an expanded single gene in IPT, we didn t even have the traditional carrier panels that are expanded until this year. What that meant was, you now, in these health systems, genetic counselors who take care of the rare conditions and counseling for these conditions due to family history or they tend to like these larger panels, even though most of the testing, maybe 95 percent of the testing are driven by OBGYNs and MFMs, we weren't serving fully the needs of genetic counselors that really need these expanded panels. So by offering this, it is not that we expect suddenly vast majority of our volume to come in from 130 genes, but now we become a true contender for health systems because now we are serving the needs of genetic counselors as well. Yeah, you're in the game there. Okay. Okay, and then you also mentioned EMR. You had the announcement at the beginning of the year that you're now in the process or you're at this point maybe integrated with the Epic Aura system. I know that that takes time as well, but if you talk to other players in the market, they do tend to see a benefit, I would say, somewhat fairly quickly in terms of volumes from just having that process be more ironed out. Is that something you're seeing, and then what do you think that portends for the future as they work through that? Yeah, I mean, we have integrated with Epic Aura faster than any lab. We actually, you know, they have a scorecard and we did it faster than in the lab. I think it speaks to our execution ability. But of course, even after you integrate with Epic aura, you need to go integrate with each health system. And we have first done that with a few health systems that we have been able to get onboarded in 2025 and, you know, 2026 that were already using us because what you see is that, as you mentioned, even for people, you know, the systems that are using you or clinics that areusing you, being EMR integrated results in, you know, both those places to be secure but also an uplift in the test volume that they are sending. We certainly see that. We have already started seeing some benefits of those existing places. But the primary reason that we wanted to invest in Epic Aura is new health systems. And that is something that we are still working through because it's not just about integrating with Epic with these health systems, You know, they have a number of kind of phases that they have to go through from cybersecurity review to Epic Aura integration to phlebotomy agreement to, you know, vendor approval. So even if you have their clinical committee already made the decision that we are going to use billion-to-one for all of our testing, it can still take 6, 9, 12, sometimes even more months before you actually get the full kind of switch. And it is a switch-like transition when it happens. Okay. Okay, so if that was January, or at least that was when the announcement was, and it could take six to 12 months, then arguably now-ish is when you think you're really going to start to see the volumes meaningfully, I don't want to say inflect, but you should see the result of that being turned on. Is that fair? Yeah, I think, you know, Epicora, we integrated by Q2, so I think we should start seeing it probably, you know, in Q1, Q2. Beginning of 2027. Beginning of 2017. Do prenatal and oncology get turned on at the same time, so to speak? For the vast majority of the health systems, yes. Okay. Got to talk about competition a little bit. When we were working with you guys on the IPO, it was very clear that the idea that you don't need the father's sample was an advantage. That resonated in pretty much every doc conversation that we had. Natera is the incumbent in the space. They launched a fetal focus assay, and our survey work suggested that some of these docs might be at least interested in what they have there. It doesn't look like the performance of those two tests is on par with one another, but but it does seem like it's a change in the competitive environment. I'd love it if you could just spend a second talking about whether you think that assay for that company makes a difference for your prenatal volumes. I think it does change the conversation in the sense that you still, you now have to explain how you are differentiated against that competition. You need to go through your data, your clinical studies. But it is a field that we have really created as a category, and we have so many more clinical studies and evidence around this. The other thing is that the competitions assay is primarily designed to rely on still partner testing. So the test works better when the partner testing is done, because it relies on the link synapse. So from that perspective, even the workflow and the positioning are actually different. You know, ours is, you know, as performant when the partner testing is not done. Whereas I think the alternative positioning is that, you know, let's try to do partner testing and if the partner testing cannot be completed, this can be used. And, you know, that differentiation already makes a big difference, I think, in OBGYN GYN clinics. But I would also say that I do, I'm very hands-on, I conduct almost daily sales calls. And when you have daily sales calls, like in the past two months, I might have had 40 of these. I don't think I heard the name of that computing product once. Because these sales calls, you know, what happens is that you are really trying to solve problems around phlebotomy, logistics, you know, the, you know, the agreement that they need to sign, you know, for vendor approval. All of these steps actually are much more important because even if, you know, you go and repeat that survey or, you know, those discussions and you talk to even providers that are not using us, right, as long as I think you know an unbiased party explains what these products are I think we'll get you know nine out of ten physicians to still say that you know we have a great amount of differentiation from fetal antigen and IPT to how our RHD and IPT actually works across all US populations you know the competitions test does not you know how our single gene and IP T has so much evidence and works as well when the partner testing is not done. So we can prove that we have the better products, but that is not, you know, that doesn't determine that you actually get them to use you. Unless you are easy to use, you are in the EMR, you are still fighting that battle. So a lot of the times, our battle is not against the competition. It is actually against inertia. When we do this analysis every month of the top 10 accounts that we receive, you know, from which competition. And we have been doing this for more than two years. It literally did not change in these two years that the number of accounts that we receive from each of the competitor stay the same throughout this period. So that really, I think, speaks to how it is not really about, you know as much product differentiation but it is about you know being able to you know move against the inertia of a large health system and you know how long it takes for them to switch okay so you so you assess new business wins versus switches from competitors switches from competitor's data does not look like it's changing gives you confidence that the competitive dynamic is not different than what it was, at least as far as volumes go. On the new business wins, what is changing? I mean, what are you noticing between an independent clinic that comes on at the end of 2026 versus one that was last year? Is it simply awareness? I think it is, if you look at independent clinic market of being 40%, it is so much easier to grow like 50, 100% year-over-year when you are growing from 10% market share to 20% market share. You can't grow another 100% from 20% market share the 40% market share. So part of the dynamics is that we are at a different part of S curve in the independent clinic wins. And that is why health system has become a much bigger part of our growth strategy in the long term. And is your rep activity going to be incentives or just the focus for the reps evolve to come to be more focused on the health systems and is that something that you think you know just the evolution of that obviously the number of reps will be greater but also the focus seems like it's an important element for 2027 as well certainly yeah I think in independent clinics the more reps that you add the more wins that you are going to have but with health systems you are not going to change how fast the health system moves by adding more reps into that particular region that health system operates in but also historically we have you know incentivized our sales team to focus on quarterly goals right quarter over quarter growth every single quarter right they have to hit that number and that focused them so much on the single specialty clinics as well because they are not going to get a health system switch over the course of three months So we are, of course, you know, making certain changes to balance that quarterly growth with the health system focus and with annual sales cycles that health systems have. Yeah, okay. Okay, I need to go back to oncology for one quick question, then I'm going to ask you a margin question as well. On the oncology side, what do you think remains unsolved from Maldi X on response? we're getting down to it I mean it's almost December it feels like maybe the decision there on their part is more of a 2027 thing but what is it that you think that they're still working on so you know what we realized was that you know we were being asked for cancer type by cancer type level evidence that no tumor informed assay was asked for and the you know in increasing the rarer cancer types right so that really I think told us that the concern from moldy X is not really about the cancer type data but it is about whether a tissue free test can perform as well as a tumor informed test you know they haven't given longitudinal you know immunotherapy coverage to really any tissue free tests in the past whereas I think tumor informed tests even without showing cancer type by cancer type evidence have been able to get those coverage decisions. So for us, you know, doing the head-to-head against a widely used tumor-informed assay that has coverage was a way to convince Moldy-X that, you, know, this is S-performant and, you know, that comparison was done pan-cancer and so that is why we believe that this can be the evidence that moves Molde-X towards coverage. Yeah. Okay. Very helpful. Last one on margins. You are ahead of the game there when it comes to comparison to peers. I have a double-digit EBITDA margin in my model for 2026, garden and terror, still running through money, losing money. Where does a 10% EBITTA margin go over the next couple of years when you think about just investment and then some of the things you need to do, but also goals that you might have on profitability? I think every product line that we build every investment decision that we make is done so that you know each of these product lines can reach you know 70 to 80 percent gross margins if not higher and that the operating margin on a product line basis can be 30 percent plus but that doesn't mean that we are going to reach 30 percent gap operating margin you know next year or the following year because we continue to invest in new areas. These are such large markets that earlier parts of our business, you know, with 30 plus percent operating margins are used to grow into, you know. Larger and larger markets that take more and more investments. So, for us, you know, the gap profitability is a must-have. But as we get into larger and larger markets, I think we are not going to see, you significantly increase profitability on a company-wide basis but on a individual product basis you know we are going to see more and more products joining the you know 30 plus percent operating margins and you know i think over long term as all of our product portfolio matures you know that is where we want to be okay we are at time okazan thank you very much for coming to of the conference, appreciate it. Thank you.