UBS Global Healthcare Conference - VERACYTE INC

Financial Performance:

• Reported strong Q3 results with 27% adjusted EBITDA margin and over $40 million in cash generation.
• Decipher volume missed by approximately 1,000 tests (equivalent to two days of volume) due to transitory factors.
• Total revenue growth in Q3 was positive across the board, though overall growth rate is decelerating into 2027.
• Initiated a $100 million share buyback program.
• Revenue growth guidance for 2027 reflects mid-single-digit percentages, with a bridge including approximately 5,000 tests (ProSigna/Bladder) and mix/collection headwinds.
• ProSigna ASP expected to be approx. $3,800, significantly higher than previous internal models of ~$2,500.
• Company remains committed to a 25% EBITDA margin target.

Guidance and Future Outlook:

• Reset 2027 Decipher volume guidance to a normalized run rate of 12,000–15,000 tests, down from the post-2023 guideline acceleration peak of 20,000+.
• 2027 revenue growth expected to be mid-single digits due to collection headwinds, mix of lower ASP products (ProSigna, Bladder), and one-time prior period comparisons, rather than a structural business slowdown.
• Long-term Decipher penetration target remains 80% of eligible prostate cancer patients (currently ~35%); 12,000 tests is the conservative starting point, with upside to 15,000+ driven by future catalysts.
• 2028 and beyond expected to see revenue growth align more closely with double-digit volume growth as ProSigna reimbursement matures and low ASP comparisons normalize.
• Bladder franchise expected to become a meaningful growth driver starting in 2028 with the launch of UROAMP and TrueMRD MIBC.
• Metastatic prostate cancer (EnzoMate) and low-risk Decipher guidelines are viewed as near-term upside catalysts (quarters, not years) pending publications.

Business Segments and Product Lines:

• Decipher Prostate: Growth velocity slowing post-NCCN guideline "bolus" (2023-2024); current focus on intermediate/high-risk categories where growth is robust; low-risk segment facing headwinds from guideline changes and fewer diagnosed patients.
• ProSigna (Breast): New high-impact test with differentiation from OPTIMA study (66% of women can avoid chemo); CMS reimbursement secured for Medicare, commercial rollout ongoing; expected to be a major growth pillar in 2028+.
• Affirma (Bladder/GYN): Delivered a strong quarter, now accounts for ~34% of sales; growth driven by low no-result rates and share gains; potential for future growth in 5/6 grade categories via new genomic signatures.
• Bladder Franchise: Comprehensive portfolio now includes UROAMP (non-muscle invasive), Decipher Bladder, and TrueMRD (muscle invasive); three distinct analytes (urine, blood, tissue) cover the entire patient journey.
• M&A: Completed important acquisition to bolster the bladder strategy; committed to using free cash flow to fuel future M&A while maintaining margins.

Market and Competitive Landscape:

• Digital Pathology AI (DPAI) is a primary competitive noise source, consuming sales team resources and delaying adoption of new predictive claims; VeriSight plans to counter this with significant sales force expansion in late 2027/2028.
• ProSigna faces a competitive landscape in breast cancer but differentiates with strong clinical evidence (OPTIMA) and a clear path to #1 market position.
• Decipher maintains a strong franchise with hundreds of publications supporting its clinical utility; market penetration is viewed as a long-term doubling opportunity (35% to 80%).
• Prostate cancer diagnosis incidence is growing 3-6%, though the proportion of "low-risk" patients is shrinking, which aligns with Decipher's differentiation in higher-risk categories.

Risks and Challenges:

• Decipher Volume Deceleration: Slower than expected growth due to the fading impact of 2023/2024 NCCN guideline updates and a smaller low-risk patient pool.
• Competitive Distraction: Time and resources diverted to address Digital Pathology AI narratives rather than selling Decipher's evidence.
• Reimbursement and Guideline Uncertainty: Delays in new publications (e.g., Metastatic, Low Risk) or guideline updates could delay expected upside; ProSigna commercial adoption faces "sand in the gears" regarding payer conversions.
• Product Mix: Introduction of lower ASP products (ProSigna, Bladder) in the short term will dampen revenue growth percentages despite volume gains.
• Sales Force Scaling: Hiring and ramping a larger sales team to counter AI competition is a multi-year effort with near-term costs but delayed revenue impact.

Management Commentary and Tone:

• Management tone is confident and forward-looking, emphasizing that Q3 Decipher misses are transitory and that the 2027 guidance is a conservative "anchor" rather than a long-term cap.
• CEO Mark Stapley and CFO Rebecca Chambers repeatedly highlighted "good news" (EBITDA, cash, Affirma performance, M&A) overshadowed by market overreaction to the Decipher volume reset.
• Firmly rejects the narrative that VeriSight is no longer a double-digit growth company, citing double-digit volume growth and a multi-product portfolio strategy.
• Acknowledges the "bump in the road" nature of Q3 but asserts the company retains the ability to deliver long-term value through execution and evidence generation.

Analyst Questions and Answers:

• Q: Why is the 2027 guidance reset to 12k-15k if penetration is only 35%? A: The 12k figure is based on current evidence and standard sales rep growth; the 15k+ requires new catalysts (evidence/guidelines) which are not guaranteed in 2027.
• Q: How significant is the impact of Digital Pathology AI? A: It is the most near-term controllable challenge; requires hiring more reps and medical liaisons to educate physicians on Decipher vs. AI, with impact expected back-end of 2027.
• Q: When will Bladder become meaningful? A: Minimal impact in 2027 (proof points expected), but "juice" comes in 2028+ with full product suite validation and reimbursement.
• Q: What is the timeline for Metastatic (EnzoMate) and Low Risk guidelines? A: Quarters, not years; dependent on pending publications.
• Q: Is the 2027 revenue guidance anomaly structural? A: No, management views it as an anomaly driven by collection headwinds and product mix; 2028+ should see convergence of volume and revenue growth.

Other Key Points:

• VeriSight has served millions of patients, a milestone highlighted by management.
• The company maintains a "playbook" for diagnostics: generate evidence -> secure guidelines -> drive reimbursement -> achieve penetration.
• Biopharma interest is rising due to VeriSight's whole transcriptome and whole genome data platforms, particularly in breast and bladder.
• ProSigna market opportunity is estimated at $250M-$500M+ given the large addressable population and high ASP.
• Management emphasized that the 2027 guidance is not a "cap" but a "starting point" with significant upside potential if evidence catalysts materialize.