Caris Life Sciences, Inc. ($CAI)

Bobby Hill, Senior Vice President and C-CEO; and then finally, Luke Power, CFO from Caris. The recent the IPO-ed less than a year ago, and we'll have a presentation. If you have any questions towards the last 2 minutes, please raise your hand. We'll be happy to take them. Thank you for being here.

Great. Well, thank you. This is our first conference here, actually, after many being public with our IPO last June, so it's a pleasure to be here. I think my main point that I'd like to just start out with is, although we've been at this since 2008, a with our company. We're looking at opportunities in the marketplace that we think are more remarkable. facing our platform than we've ever seen. We've been building this business since 2008. We got a very early look at multiomics with the molecular profile Institute we launched, as you know, whole exome, whole transcriptome, 23,000 genes well in advance of anybody in the marketplace, and that has really helped define us and has put us in a position here to benefit, we think, from all of these amazing trends in precision medicine, precision oncology and in particular, cancer genomics. We've been building this platform for many years. We think it's defined in large part by our technology the 23,000 genes is not a reflex or part of the menu, but every single patient has gotten this for many, many years. So we're scaled up now. We're annualizing at over 200,000 profiles on an annual basis. So we have scale. We have broad reach. We're reaching now over 6,100 oncologists in the United States. Now every time we profile a patient, the amazing thing about our business model that goes into our data set, which is one of the largest. I think Milan is the largest transcriptome set actually in the world. So over 1 million genomic profiles, most of which now are matched with clinical outcomes. And that powers us, it powers our R&D internally, and it makes us extremely attractive to our partners, both academic medical center partners, which are also clinical partners for us, but also in the biopharma community as well. The data set continues to grow. It's a very important part of our business, as I mentioned in many respects and grows every time we profile patients. The trends here, we got a lot of questions.

I don't -- I think we're seeing as many opportunities today, if not more, than in the 8 years that I've been at this company. So the TAM is large. It's growing. There are a number of names in the space, but nevertheless, the penetration rate against the therapy selection TAM alone is only about 35% penetrated and the penetration rates of course, in some of the new exciting modalities like MRD are extremely small. That business is really just beginning. Molecular profiling has emerged as the standard of care. So that's the good news. But there's a lot more work to be done in getting every patient profile from a cancer center leadership perspective, getting them profiled consistently and systematically, it's hard to run these organizations, so getting all of the different oncologists to behave in the same manner and apply a precision oncology program in a thoughtful way as part of their challenge, so platform like ours, so in particular, our platform is very well suited to help them to help them from various departments and these are complicated organizations to get patients profiled properly, early and with the best technology. And we have a whole organization, a whole channel that Bobby runs that is set up to do this with senior people who cover the cancer center leadership as well as the salespeople who cover the individual oncologists, a team of 50 PhDs in molecular medicine MSLs who help with the interpretation and support the oncologists in finding the right clinical protocols, trial eligibility, et cetera. So this revolution in molecular medicine is really just beginning, and all of the hard work that we and others have done over the past number of years is really, I think, setting us up over the next 5 to 10 years for just a remarkable time, a remarkable time of introducing new modalities and creating an environment where molecular information is delivered in a strategic way across the cancer centers at the individual oncology level as well as at the institutional level. The cancer centers are moving towards institutional decisions as a result of this, not just allowing the individual oncologists to do whatever he or she happens to want to do, including not profiling in some cases, there's still some amazing situations that you hear about where patients are getting profiled at all. So all of this is really an opportunity for us to deliver the capabilities in a partnership sort of way. So these trends, I think, have -- are ones that we've thought about for many years, and we've set up our channel, our commercial channel and our research channel to take advantage of these trends, but also serve our client base in as effective way as we possibly can. So starting with our philosophy, which is patient first. And I'd say, interestingly, our move to whole Exome whole Transcriptome wasn't a result of a decision around a particular economic or market opportunity, but really was oriented around what's the best thing for the patient and how can we help the treating oncologist give them the best tools to help the patients. So everything we do is oriented around a patient-first philosophy. We have been investing in our platform. We think our platform is highly differentiated, very effective, et cetera. We went through a period of time, frankly, where we were capital constrained prior to the IPO. So coming out of that, we are engaging in a very deliberate investment program that's being led by Bobby, who's been in the seat now CCO, the Chief Commercial Officer, seek for a couple of quarters. So he's bringing new leadership, new energy, new tactics many things that I think are going to be fabulous actually for us and for the cancer centers. And we're also complementing that with an investment program to increase the headcount, the FTEs, increasing the number of territories as well as building some new and strengthening some other specialized product-oriented sales forces. So we think there's a tremendous amount of upside and Luke will talk about this in terms of our case volume growth and beyond what we've put up for the last couple of quarters, where we're very excited about that. We cover not only the individual docs as I mentioned, but also the senior leadership at these cancer centers -- we think we do this in a unique way, in part through the Precision Oncology Alliance, which is dynamic. It's growing. It's now at 100 sites. So we added UC San Francisco and NCI site, obviously, in San Francisco, a very important one, that got us to 100. So this is a very important collaboration around research and data. It's something that they love. They view it as their own and they have the opportunity at its core to get access to our data set, for their own research, research with us, et cetera. So it's extremely dynamic. This is a force actually with 100 members now. And when I joined the company 8 years ago, we had 19 sites. Right? There were a couple of other collaborations like this that were similar size, and those no longer exist, RSS sort of emerged as the leading collaboration in precision oncology. And I would also argue maybe even more broadly in precision medicine, and we're seeing opportunities to extend into the other disease states as well. That represents of the 10,000 medical oncologists in the United States. It represents about 4,000 of those oncologists. So it's a pretty substantial part of the overall market. in its own right. So maybe just summarizing, and I'll turn it over to Milan. We go to market in a way we think we're highly differentiated from a technology perspective, that's true for our existing therapy selection products. We just launched this last month, a very exciting whole genome platform in hematological cancers called ChromoSeq. We also launched a Digpath technology called Micari for ChemoPredictor in breast cancer. So we're very excited about those in terms of completing the continuum of care but also continuing to enhance our relevance and importance at our cancer center partners. The financial profile, which Luke Power will talk about is we put up 79% growth last quarter, year-over-year revenues, 85% in molecular profiling and think that the fact that we're profitable and have been for the past 4 quarters, profitable free cash flowing. Our balance sheet cash and is growing. This gives us huge strategic flexibility to do a number of things from our product pipeline which is so exciting in the MSE and MRD area. So with that, Malon.

Great. Thank you, Brian, for a great introduction. So a pleasure to meet you guys on Rode, Chief Scientific Officer. And I'm going to do today is walk you through our technology platform. and then talk a little bit about biopharma. So as Brian already alluded to, Crisis really prided itself on always being as comprehensive as possible. We standardized on whole exome transcriptome sequencing in 2019. We have the only FDA-approved total ex transcript in the market. And we do this type of comprehensive sequencing, looking at every single gene in the genome, both at our tissue but also in blood. We do this for 2 reasons. One, -- we want to leave no stone unturned to identify a drug or a clinical trial for a patient. Prior to come to care I was in the clinic for many years. And I used to explain Caris testing the patients as you're about to get to start trick in technology. And if there's a drug or clinical trial out there, we're going to find it. and we want to be able to give our patients every shot on goal, it's possible to figure out a vulnerability in their cancer that we can treat. But secondly, and as I'll touch on later, while our #1 goal is always the patient of today. We also know that this data can be used to help the patient of tomorrow. And we use our data vastly for research with the Precision Oncology Alliance, as Brian mentioned, with pharma and also for internal development. With Cars Assure, we are really excited about this platform is really a revolutionary product in the market to look at the entire coming transcriptome in the blood and be able to apply that across the care continuum, currently launch for therapy selection but we have significant efforts in developing this for monitoring. We have efforts in MRD. And then as I'll touch on later slides, good Caris detect a whole genome platform for early detection. So when it comes to our comprehensive molecular profiling, I won't through all the details here. But I think really, again, the high-level point is that when you go comprehensive, when you go broad, you can capture the litany of every potential analyte you can think of from a sequencing platform, things basic like mutations and copy number infusions, but things that are much more complex, things like AI signatures and others that allow us to, again, give patients every shot possible giving them a complete answer for the treatment of their cancer. Now 1 thing about this comprehensiveness is it gives us a lot of versatility as you can imagine, with its application for clinical care. One of the things that I love about the versatility is that when a new biomarker or a new clinical trial comes out, we don't have to redevelop our panel. We don't have to add a different gene, go through capital validation and so on and so forth. We already capture it. So what's really cool at Caris is that we have an evidence team who all they do every day is actually a minder literature and abstracts and so on for the latest and evidence in NCCN guidelines. And then when a new drug is approved, our team will actually go back usually a year, identify every patient who was positive for that biomarker and we contact to let them know say, hey, your drug, your patient is positive now. This drug is recommended. We don't do that at any charge. That's just part of our standard of care of what we do at Caris. Also by having this conference of sequencing, we're able to use really cool AI signatures that we develop. I'll dive deeper into GPS AI in later slides, but this is really important because -- when you are analyzing 23,000 genes across many, many, many hundreds of thousands of patients with a variety of different clinical outcomes, frankly, the human mind cannot actually hypothesis or determine what is the pattern that could help determine, let's say, a responder from a nonresponder or be able to predict prognosis. You really need powerful AI tools -- and AI, while such of a bus term today, it's been in our DNA for her many, many years. And so 1 thing I always like to say is that Caris is doing AI before CPT wrote your kids says. I mean, we've been doing it for a long, long time for many years. We have, I forget now, almost 80-plus PhD level data scientists that cares for mathematicians computer scientists. So really mining our data on a daily basis to really come out with the best end points. One of the things that was really cool, I'm biased as the first author, but this paper published yesterday. Where we actually showed that TMB, so TMB stands for tumor mutation burden. If you guys are not familiar with what TMB is, TMB is how heavily mutated to cancer is -- when a cancer is more heavily mutated, it looks more foreign to the immune system. And it's more foreign to the immune system, the immune checkpoint inhibitors work better. So when you block a target called PD-L1 these cancers tend to be more uncovered to the immune system and they tend to attack it better. Well, TMB is calculated by counting all the mutations. And what a lot of people have tried to do is they'll use gene panels like 300 genes or 600 genes or whatnot and estimate what the total mutation burden is from just a small sliver of the total gene pool, we at Caris measure all of it. So by definition, our estimate is more accurate and the academic literature suggests that as well. Well, what we showed yesterday was for the first time, not only is it more accurate, but it actually does a better job at predicting outcomes to immunotherapy. It's the first paper ever to demonstrate that TMB by whole exome results in improved outcomes, not just better assessment of improved outcomes. So we're really excited this paper just published yesterday, and we're excited to be talking more about it today. As I mentioned, with our whole excellence transcriptome, it is the only FDA-approved whole exome assay in trustee on the market. FDA approved with 8 CDx indications across 20 therapies. What does this mean? Does this mean that Caris does a better job to cure patients after [indiscernible] than before it did? No. What it does is it gives a stamp of approval that the quality of our test and its reproducibility and its sensitivity specificity meets the bar of the FDA and that when people are getting a curious test, they have reliable results. And kudos to Dr. Oberley, who's our Chief Finical Officer, he helped lead a lot of initiatives. There's about 15,000 patent submission took a massive amount of effort, but really a testament to the work that we do at Caris. So building on our legacy in tissue, we launched now A couple of years ago, Caris Assure, which is also a whole exome and transcriptome, but this time on blood, and as many of you know, liquid biopsy has really revolutionized our capabilities to do molecular profiling in a very noninvasive method. As you tell patients, there's not a line of people outside the radiology suite to get a tissue biopsy. It's not really fun to you right now on. But a liquid biopsy is easy. It's a blood draw that could do in clinic. And what we've learned is that we can really amassed a huge amount of information with using these really sensitive next-generation sequencing techniques. And what's really cool is that the way that we can see these technologies applied is that these platforms are really complementary. They don't replace each other. They're complementary. So every patient is going to get a tissue, you can have a cancer diagnosis without tissue. Tissue remains the gold standard. It's the most sensitive allows us to do not only sequencing but other types of tests like immunohistochemistry for gating therapy. But we know that cancer evolves and getting a blood-based biopsy gives us additional information on the molecular makeup of the cancer. So these are really powerful and use together. And Luke can talk more. We're seeing a lot of docs use these tests in a combined fashion and also to monitor patients while on therapy. One of the important things about what we do at Caris -- this is going to be a surprise to some of you, but we sequenced the plasma to look at tumor-derived DNA and RNA, but we also sequence the white blood cell layer or the buffer coke to look for germline mutations, meaning mutations you were born with that predispose you to cancer, but also to determine definitively these mutations called Clonal Hematopoiesis or sometimes called chip -- so you can made your neighbors when you learn if you learn something new today. So Chip are mutations that are naturally occurring that tend to increase this age, smoking and prior chemotherapy exposure. So a guy like me has more chip than a young guy like Kyle right here. But what these are is these mutations, they're naturally occurring. And what happens is sometimes they actually occur in cancer genes that make it look like that mutation came from the cancer, but it actually did it. So it came from our white blood cells. And what that does is it causes interference in our interpretation of these liquid biopsies. And -- so Caris is the only test on the market that actually definitively determine these mutations and effectively subtracts them so that our oncologists are not making incorrect decisions based on mutations that don't actually come from the cancer that actually companies naturally occurring mutations. I'll end up here on the pipeline with GPS AI. Actually, it's also an algorithm led by Dr. Oberley, who's here in the audience. And this was an AI algorithm that we run on our tissue test that determines the tissue of origin. So it was originally designed to help with cancers of unknown primary. So this is when a patient is diagnosed with cancer, they don't know where it comes from. I will tell you, it's actually one of the most scary situations for a patient. Your doctor comes in the room so you have a terrible cancer. And by the way, we don't know what it is, and we don't know how to treat it. It's extremely scary. And having GPS AI has been phenomenal. It's highly accurate for 90 tumor types, highly sensitive. But where we also found it to be really helpful is not just in diagnosing cancer or no primary, but every day, we get about 1 to 5 cases where the AI algorithm actually says it's a different diagnosis than what comes in on the pathology report,meaning we're finding misdiagnosed cases. And that's also equally important because the basis -- the fundamental basis of all cancer therapy is based on what type of cancer it is. And so Matt and his team do a wonderful job of calling physicians doing the additional work up and every day are overturning diagnosed so that patients are always going the right diagnosis. This is just part of our standard of care at Caris. So moving on with the pipeline. As many of you know, we've been really excited by our early detection results. You just need to read Alex Dickinson's Post a LinkedIn. He's very excited. But as you know, we are really pioneering our work in early detection applying a whole genome approach to be able to take as many shots on goal to be able to detect the cancer signal -- our early results with CHI, which is roughly 3,000 patient case control cohort demonstrating fantastic 60.3% Stage 1/2 sensitivity, while maintaining really high specificity. And this is really important because if you're going to have an early detection test, your test has to catch it early. And I think for us, that's the bar and we're really applying again the most cutting-edge genomics approaches, but also AI approaches to be able to tack cancers at early stages. As you may aware, there's others in the space who have been having real difficulty with things like breast and prostate cancer early stages. As you can see from the data below, our results are showing to be considerably better than what you're currently seeing out on the market. We also launched recently Caris ChromoSeQ. This is our first whole genome assay for therapy selection for hematological tumors. It's launched for AML, MDS and MPN, originally developed at Washington University, but we licensed it and then further improved upon it and really allowing us to fill a gap in our sequencing to be able to be comprehensive as possible at cancer centers being able to service both their solid tumors and their hemalignancies, I also like to point out obviously, thankfully, relatively uncommon, but as you guys know, with pediatric cancers tend to have more hematological malignancies being able to service our pediatric population much better now that we have this whole genome test. We're developing a variety of tests that cover our entire pipeline as a reference below -- I'm sorry, referenced previously, Caris Chromoseq. My clarity, as Brian mentioned, is actually a digital path AI algorithm determining breast cancer recurrence. Think of it as a ditch path alternative to Oncotype and to MammaPrint. As many you know, this is a very large population, and it's actually a large population that doesn't get sequenced. Because chemo endocrine therapy is standard of care, and this really enables us to have access to a large population with this cutting as molecular profiling. And then we're also building out MRD solutions, both tumor naive and tumor informed. I'll end here with biopharma, which I also oversee and in biopharma, we have 3 major pillars. We have our core biopharma services, which is our molecular profiling those clinical trials and big tissues and joint research we do with pharma. We have our strategic data. We have amassed the largest data set in cancer, whole exom and transcriptome. And this is obviously valuable to pharma for their development and have a lot of active deals and a lot of partnerships in the pipeline. And then we have Caris Discovery, which is our division of Caris has dedicated to using our data, our tissue and some proprietary proteomics technologies for the identification of novel drug targets. Just an example, very recently, our largest deal, actually, in our pharma deal in our company's history with Genentech in December, which is for Caris Discovery, which is a partnership to identify novel drug targets in refractory tumors with a significant upfront and milestone. And I will tell you the Genentech scientists had been an absolute joy to work with. It's a scientific nerves between us and to be honest with you. I'm actually going be there on Friday again for yet another one. So we have a great relationship, and we hope to really change the face of cancer with this relationship. So with that, I'm going to hand it off to someone smarter Mr. Power.

efinitely not smarter. I'm the reason why I go last. So from a from a performance update, obviously, we publicly disclosed our Q1 results last week, and it was another very strong quarter for us. So from an operating standpoint, we have great operating leverage right now. So our revenue for the quarter obviously grew 79%, with molecular profiling leading the way with blood and tissue bode above 80%. And -- and again, that's driven by 2 key factors. Obviously, for us, in the molecular profiling space, there's going to be a PTV.So the price and the volume. Our volume, our growth grew 15% year-over-year as we're working through kind of ramping up that sales force, but our ASP also grew 61%. And it's that leverage the combination of those 2 things in the equation is driving that great growth that we've seen since we've been a public company. And obviously, that's translating to the bottom line too. We're very unique in that we've been now for the last 4 quarters, free cash flow positive. And what we're doing with that free cash flow is obviously, we're reinvesting in the business. Milan went through the pipeline. And that's something that we're going to push hard on very this year with detection being kind of the primary focus over the next couple of months, along with MRD and obviously, scaling up my clarity and ChromoSeq and then continuing to work on our MRD platform. So from an additional operating highlight standpoint, obviously, we reported at the achieved study that Milan went through. But as Brian touched on, because of our unique financial position, we're also able to refinance our debt and get lower interest rates, which again is positive from an EPS standpoint, but it also allows us to have additional strategic capital in order to exercise on our kind of initiatives for this year. So from a Caris standpoint. We've always been clinically focused. That's why the majority of our revenue has been driven by the molecular profiling unit. Now what we're doing this year is we're expanding both units. So our molecular profiling sales team led by Bobby is going to be increasing by 25% to 30%. And it's the same with our pharma team. And again, it's because of the operating leverage that we have because of the decisions we made years ago, to go to whole exome and whole transcriptome and get and seek a higher reimbursement for that because it is the broadest test out there. It allows us from this financial position of strength to execute throughout the year and continue to drive the top line. So again, moving to the kind of the clinical volume. So part of the equation, the V of the equation. Obviously, the 15% was still very profitable growth for us. I think what we wanted to execute on this quarter, we did from a realignment of the sales force that was disruptive in January, but we felt very good coming out of that and how we set up for the rest of the year. The other key thing from a Q1 standpoint, Obviously, we've been primarily focused on tissue for many, many years, like we're 1 of the leaders in the space from a tissue standpoint, but we're also continuing to gain penetration within the blood market. So our cars Assure volume grew 58% in the quarter. Again, it's a smaller end that it's starting from, but it's continuing to show the penetration that we're getting from having a unique assay in the field, obviously, doing whole exome hole transcriptome and chip. Again, we have 270 folks at the end of Q1 on the way to 300, and we'll continue to assess that as we expand throughout the year because, again, the financial profile of the company allows us to do that. and the growth that we get from additional salespeople is obviously a very high ROI right now. So from a financial overview standpoint, obviously, a lot of people in the space to have about like mid-60s gross margin. it gets a little lost sometimes we managed to achieve that by doing the broadest panel possible doing whole exome and whole transcriptome. So we don't have to go and continue to add to our assay. So many people, obviously, you start with lower genes, -- you'll continue to see that expand. We decided years ago based on David Hulburt vision is to go as broad as possible so we can future proof our assay. Now what that allows us to do from a financial performance standpoint, it allows us then to continue to get efficient with that. So as sequencing improves as the cost of sequencing comes down, you will see based on us pursuing reimbursement, our COGS are going to continue to come down based on the advances you're going to see over the next coming years. And again, that all flows down to the bottom line, which is the whole purpose of this strategy. Is this continuous flywheel of more and more data coming in, sequencing costs coming down. It will allow us to continue to generate like a solid bottom line going forward, and we're not just chasing profitability. We've already achieved it. So molecular profiling services performance. One of the key things for us for the last 4 quarters is, obviously, we've over excelled from an ASP standpoint. So our molecular profiling for tissue was just under $4,100 for Q1. And then our Caris Assure asset is just under 4,000 -- sorry, $2,421 for Q1. From a reimbursement standpoint, 1 of the key things that gets lost is these are not ADLT tests, they're CDLT tests, which is different. So the pricing structure and what we actually do is more stable over a longer period of time based on PAMA reporting. So from a tailwind standpoint, I'll start to wrap it up. We've done grace over the last year with our payer contracting. Obviously, you can see it in the numbers. But especially with my cancer seek gets over 225 million covered lives, and that's within the space of 1 year. We're continuing to take that approach into Assure now. And that's kind of the next focus for our market access and our billing teams as we progress forward. And then from a full year guidance standpoint, we reaffirmed our guide. We feel really good about that right now based on how we saw things coming out of Q1 and I think as we progress throughout the year, obviously, you're going to see my clarity. You're going to see ChromaSeq revenue, you're going to start to see detection launch, and that will continue to kind of compare on top of this initial guide, which does not include any you've done 2 seconds.

No questions.

Well, thank you all.