Fulgent Genetics, Inc. (FLGT) Earnings Call Transcript & Summary

Great. So we are live now. Well, thank you so much for joining us today. And we're very pleased to welcome the team for Fulgent Genetics. Joining me today are Brandon Perthuis, Chief Commercial Officer; Paul Kim, CFO; and then we have Dr. Ray Yin, President and Chief Scientific Officer. Welcome, everybody.

Thank you.

Great. So before we go into specific business, maybe just give us a little bit a quick update in terms of the key highlights in the Q3 earnings last week.

Yes, certainly. I think we had a strong quarter -- third quarter. We break our precision diagnostics business down in 3 areas -- I'm sorry, our lab services down into 3 areas: precision diagnostics, anatomic pathology and pharma services. So this is the second quarter in a row that all 3 areas had growth. Precision diagnostics was particularly strong, about 20% sequential growth. We achieved our guidance for Q3. We reiterated our guidance for 2024, which is $280 million. We reiterated our expected cash balance at the end of the year of at least $800 million in cash. Gross margins grinded higher. Yes, I think it was a pretty solid quarter for the company. And hopefully, the momentum carries into Q4 and then on to next year.

Great. So maybe stepping back a little bit, just talk about like more high level. The business has grown quite a lot from like $21 million in 2018 to like $200 million (sic) [ $280 million ] in 2024, which is your guide. So maybe tell you -- tell us a little bit about like what's the drivers, right? And then also in terms of like the -- your ability of catching the NGS opportunity, both in heme and in solid, maybe just talk a little bit about the cross-selling opportunities.

Yes, certainly. I mean it's been quite the growth story. I mean, $21 million to $280 million guide, as you've mentioned it. First, I'd like to really acknowledge the technology of the company. To scale that rapidly is not trivial. And we've talked a lot about our tech platform since we've gone public. And here recently, even during COVID, we really got the opportunity to stress test that technology platform. So we're talking about things like our own [indiscernible] system, our own bioinformatics, proprietary algorithms, proprietary pipelines, variant calling tools. That's sort of the foundation on which we built the company on. So when we went public in 2016, we were pretty much a niche rare disease pediatric company. And if you fast forward to today, we have a menu of 22,000 different genetic tests, essentially spanning all areas of genomic health care from prenatal services, reproductive services, rare disease, oncology, both somatic and hereditary, adult genetics. It's been really an impressive growth story of the test menu, and that's led to the opportunities that we've had. So we've broken out of the niche rare disease market into these different areas of genomic health care. We've done a good job capturing market share in all those areas. Now the growth wasn't entirely organic. We did do a couple of acquisitions. We bought Inform Diagnostics, a great anatomic pathology laboratory. We bought CSI Laboratories, a cancer diagnostics laboratory. So it's been a mix of both M&A and organic growth, but the company has done well capturing market share. Lately, we've done really well in reproductive health as well as hereditary cancer. We made some announcements in the quarter -- this quarter about the new award and contract we won with the VA Hospital, which is hereditary cancer. It was a $99 million contract -- up to $99 million over the next 5 years. So I think the diversification of our test menu has really expanded our addressable market, and now doing a good job penetrating it.

Great. So you mentioned multiple times about share gain. Maybe can you share a little bit more successful examples? And we know that there are lots of like disruption in the past few years, right? So several players exiting the market. Do you think the market has stabilized at this point?

Yes, that's a good question. I mean, we sort of watched all that happen around us, right? We sort of stuck to our game plan and executed our plan and watched that happen around us. And in several instances, it's been beneficial to Fulgent, right? As some of our peers and competitors have exited this marketplace, Fulgent stepped in and has taken significant share in those markets, especially in reproductive health and women's health along the lines of expanded carrier screening, some of the consolidation we've seen there and some of the demise we've seen there, Fulgent has been able to step up and take some of that market share. One of the things we're really proud of is controlling our cost structure. Some of that is a testament to our technology platform and other areas of just us controlling our costs and operating our business. So we're able to operate a laboratory with, we think, some of the best-in-class cost structure. So we're able to take some of that market share, have good gross margins on that business. So -- and we're continuing to see disruption. I mean just a few weeks ago or maybe last week, there was another big acquisition in the space. So -- and there's been other labs that have exited the space. And I think each time that happens, it's been beneficial to our company. We've been sort of the rock. We've been steady. Clients see that, right? Clients want stability. They want a lab they can trust, good turnaround time, good quality, good service. That's what we've been. So we're continuing to win new clients. And I think that's going to continue.

Okay. So I assume that will continue in '25 and then...

Yes. I mean that's certainly the plan, right? I've mentioned a few times that our lab is pretty much where we want it to be in terms of capabilities, in terms of our test menu, our turnaround time, our quality, our insurance contracts, our MolDX approvals, which we're really proud of. So I think we kind of got the operation where we wanted to be. But our sales team is still subscale. I think we need to continue to build out a larger sales team. We did a little bit of that in 2024, and we saw those investments pay off, right? We've recruited some good talent, and that's beginning to pay off. So I think as you talk about what is 2025, does that carry into 2025? I think the short answer is yes, continuing to execute operationally, expand the sales team and continue to gain market share.

And then talking about the sales team, right? So right now, subscale and then you want to kind of increase the number of sales. But how long does it actually -- you need to train them, right? So how long can you actually see the impact like starting to winning contract, winning new customers, something like that.

Well, there's a big window there, right? I mean some of the salespeople we've hired and then they hit the ground running. And honestly, we do try to hire experienced salespeople with relationships, with accounts, with knowledge of the test. And part of Fulgent is, we're a complex business, right? We do have a lot of different areas of specialty. So it's not the same sales reps that are selling hereditary cancer that are selling anatomic pathology services. So we do have to build multiple sales teams to some degree. Now there is some cross-selling that happens. But some of the reps, we hire specialized reps for the testing we want to grow. So it's like anatomic pathology, for example. We're out there targeting reps with previous anatomic pathology experience with accounts, with relationships, with some product knowledge and training. So some of them have hit the ground running quite quickly, to be honest with you. And then some take some time. It could be sometimes 3 months before a rep closes their first deal. So there's a little bit of a window there. But I think we've also invested in good sales leadership. We've invested in good salespeople in 2024 and especially on the AP side because that's probably the area where we're most subscale. I mean that's a huge market, pretty fractionated market, a lot of call points. And we've been a pretty lean team there. I think right now, we have maybe 15 people on the AP sales, and that should be significantly larger. But we're not going to rush out there and hire a bunch of people all at once. We're going to slowly ease into it, look for good talent, layer that on. I mean the good news is the laboratory has the capacity and the scalability. I think that's really important. If you look at our AP lab, I mean, our subspecialty trained pathologists, our turnaround time is fantastic. And while the salespeople are wonderful, they've hired some really good ones, they're selling a good product, right? I mean if you look at -- sticking on AP for a second, if you look at our AP lab, I mean, it's fantastic. A lot of our salespeople out there selling, especially in the derm side of the business, they're running into clinicians that are experiencing like 2- to 3-week turnaround time, frequently, frequently experiencing 2- to 3-week turnaround time. And right now, we're at 2 or 3 days, right? So that's huge, right? Patients want results. I mean this is a -- sometimes a nervous situation for a patient. They want to know if this is a benign lesion or is this potentially cancer or precancerous. So they're waiting 2 to 3 weeks, that's not fun. So if we can give them results in 2 or 3 days, that's huge for patient care. And clinicians, they want to know, like, from taking medically actionable steps, the sooner they can get started, the better. So like I said, I think we have the foundation of a true world-class sales team, but they really are selling a great product. And I'm really proud of what the lab has done. Now the AP hasn't been easy, right? We had multiple quarters of headwinds. But Paul and I and the rest of the management team and the middle leadership level have really been dedicated to turning that around. And I think we have, like I said, 2 quarters in a row, we've returned AP to growth. I would say today, the pipeline is strong as I've ever seen it. We acquired the company something like 2-plus years ago, but the sales pipeline is incredibly robust. Clients are happy. So I think we have good momentum in that area, which, like I said, we didn't always have post acquisition, but we were dedicated to fixing the business, and I think we've done that.

Great. I mean, sticking with the AP then. I mean, as you mentioned, there were a couple of quarters of headwinds, but starting to getting a little bit better. So when we think about 2025, do you think it's going to be like a bigger comeback? Or it's still more like a gradual recovery type of environment?

I don't know. It's hard to say, obviously. I don't have a crystal ball, but I have visibility in the pipeline -- the pipelines and the opportunities. And again, it looks pretty robust. I think we did a lot of things with that business, and I don't want to bore the audience with all the details, but it's been both the focus on the commercial side, improving the sales team, getting the right salespeople in there, the right leadership, little things like incentive comp plans we had to redo. We inherited a lot through the acquisition, and we needed to change some things to put that lab back on to a growth trajectory, but also operations. I think we mentioned in the quarter, we bought a new building in Coppell, Texas that allows us to move out of a building that wasn't ideal. We inherited that building, wasn't set up ideal. We were able to build this one from the ground up, so we could really optimize our workflows, our procedures. And that lab has capacity, is scalable, turnaround times, quality are great. And then we were able to shut down our lab in New York and consolidate that into the AP business. So when I say we sort of turned around the business or fixed the business, it's been both sort of operationally and commercially. So to your question is what does 2025 look like? I think the pipelines and the sales team, there's enough there to continue that growth trajectory. And if we layer on more salespeople, which is the plan slowly, I think that's going to continue to fuel growth as well.

Great. So let's switch to the more precision diagnostics. So carrier screening is a big part of your portfolio right now. How big is that? And then how do you think about 2025? You mentioned there was some M&A happening in the past few weeks. Like how do you think about that dynamic? Yes, just a little bit more color.

Right. So we don't break out any sort of volume or revenue by specific test, right? We break it out into 3 categories: precision diagnostics, anatomic pathology and pharma services. So carrier screening would be in the precision diagnostics bucket. So while we don't break it out, I think it's safe to say it's our highest volume test within the company. We did do a good job capturing market share when certain players exited that space. And that was a dynamic time, right? You had a pretty big player exit the space and sort of put physicians in a bit of turmoil. They had to run out and find a new lab pretty quickly. And a lot of them found a home with Fulgent, but a lot didn't, and there's obviously other players out there. But we're continuing to go after the business that we didn't win sort of initially, right? And where clinicians are appreciating Fulgent in terms of carrier screening has really been our turnaround time, our quality, our integrations and our ability to customize the panel. Now that sounds trivial, but it certainly is not trivial. To build genetic testing panels can often take months in other organizations. We can build custom genetic testing panels in hours, right? So a clinician can come to Fulgent, custom design a genetic testing panel today and it's orderable tonight. They can send a sample tomorrow. And that's important because there are some clinicians that have very specific requirements on what sort of panel they want, how big they want, what genes they want. So I think we have what it takes in the carrier screening market. Our brand is Beacon. We had the Beacon expanded carrier screening, but it's not just one test. It's a suite of tests. It ranges from 2 or 3 genes all the way up to 787 genes, which is the largest gene panel in the market right now, I believe. So I think we've done a great job in carrier screening. And that market, I think, is going to continue to grow. I think more and more clinicians are gravitating towards expanded carrier screening. I think the days of running cystic fibrosis and SMA and Duchenne muscular dystrophy, maybe running 2 or 3 genes. I think those days are pretty much coming to an end. I think the technology exists today to offer larger panels. We can do it as rapidly as we can in the small panels. And while somebody -- as you get into 787 genes, these genetic conditions become rare -- they can become rare. But collectively, they're not rare, right? So if a couple is planning a pregnancy or is currently pregnant, and we can test for these things to give them valuable information on their future or current pregnancy, we should do that, right? So I mean, it takes both couples to be a carrier of the same condition, right? But if both couples are a carrier of the same condition, they have a 25% chance of having an affected child. I think that's valuable information that a couple should know.

So when you talk about the large panel versus small panel, do you know the mix right now? Like is it more like more than 60% in large panel versus like a little bit less in small panel?

Well, I can only speak for Fulgent. And I'm qualifying that because a lot of our business today, a lion's share of our business today, is in the infertility market. We're not much in the OB/GYN market. But I want to talk about that in a second because I want to talk about our new NIPT test. But a lion's share of our business is in the infertility clinic. So these are couples trying to get pregnant. In that market segment, it's almost always the big panel, right? Because the couple is not pregnant yet, right? So they have an opportunity to test for as much as they can to give the couple the lowest risk result possible. And then if we do detect something, the couple has immediate options, right? They can do PGD, they can identify the embryos. They can identify the 25% of embryos that have that condition, not implant those embryos. So it's immediately medically actionable. So most REIs and infertility doctors are opting to the big panel. That's most of our business. So almost everything we do today is the very big panel.

And you talked about OB/GYN and then probably NIPT will be the next good topic. So you're a little bit late in that market?

A little bit. Just a little bit.

Just a little bit. Exactly. So maybe talk about why? And then how do you think about scaling that business?

Yes, it's a good question. So again, I'm proud of our execution in the IVF space. We've done a really good job. To penetrate the OB/GYN space with carrier screening, you need NIPT. So we have a great carrier screening product. But if you go to an OB/GYN, they want to order NIPT and carrier screening together. And if you don't have both, you're not going to be successful. So yes, we're a little bit late, I don't know, a decade or more late to the game. But we knew that launching a me-too product, just a standard NIPT, we didn't stand a chance, right? And there's a lot of really great labs out there doing NIPT that have had this business for a very long time. I applaud them. They've done a great job. They've brought the technology a long, long way over the last 10 years. So we said that if we could ever launch a novel NIPT, something differentiated that we have interest in doing that, and we did. So we launched what we've branded KNOVA, K-N-O-V-A. It is a novel NIPT. So it does the traditional NIPT screening. It has microdeletions and micro duplications more than what's currently on the market. But the real differentiator, the real value add, are the de novo point mutations. So we have sort of the only one test, NIPT, that includes the de novo point mutations. And de novo point mutations are important. They're very important. They're hard to do. They're not easy to do, but they're important. A lot of these de novo point mutations cause severe disability. They cause significant problems. And there's no indication for testing, right? There's no ultrasound markers. There's no increased nuchal translucency marker. There's no family history. They're de novo, there are spontaneous events. There is no family history. So our tests can detect those things reliably with good sensitivity and specificity. And it kind of goes back to what I was saying about carrier screening. If the technology exists to look for more, and it's not wildly more expensive or wildly slower in terms of turnaround time, I think we should give patients the option. So look, I think it's going to be slow for us to grow that NIPT. I mean it's a novel test into an established market. So I think it's going to take time. But at least in our soft launch, and we started selling in September, at least in that time frame, the message seems to be resonating with clinicians. Most of them understand what these de novo point mutations are, but because no test has detected them before, it's still new to them, but I think it's resonating. So I think over time, KNOVA will do well. And back to the original point, now that we have a great carrier screening test, NIPT, we're optimistic we can now go penetrate the OB/GYN market.

Got it. I think the next logical question will be the ACOG guideline. Do you need the guideline inclusion to kind of like move the product into next stage?

Well, for de novo point mutations?

I guess, for expanded carrier screening and then [indiscernible].

Expanded carer screening, right? So it certainly helps, no doubt. But ACOG, a big organization, busy organization, I certainly don't fault them at all. But expanded carrier screening is pretty much standard of care today, right? I mean most infertility clinics in this country are ordering expanded carrier screening. So we're living in a time where how clinicians are practicing medicine are a little bit ahead of the guidelines. And I think the guidelines will catch up, right? And Fulgent as well as some of our peers, we're working together. Fulgent and our peers are working together to help move those guidelines along. We're all part of a consortium for carrier screening, promoting expanded carrier screening, expanding access to carrier screening. And I think in the not-too-distant future, we'll see a more robust ACOG guideline around expanded carrier screening. That's not going to change adoption too much because mostly standard of care today. It might change it more on the OB/GYN space. But the REI space, I think, is a little bit ahead of that curve. But expanded guidelines from ACOG and other societies like that, it does help with reimbursement, for example, right? So there are some payers out there that still consider expanded carrier screening, investigational, experimental or unproven. Thus, they may not pay for it. So those guidelines certainly help in that area. And again, I think they're coming from what we can tell.

Got it. And then on the hereditary cancer front, you mentioned about the VA contract, up to $99 million over 5 years, but you need to go and hunt the volume.

That's right.

But you also mentioned they're going to be a significant contributor in 2025. Maybe just tell us a little bit about how you want to start in that? Is it all incremental or?

It is all incremental. It's a new win. So I know there's a little bit of confusion. And in our call, we mentioned we work with the VA for a long time, which we're proud of. And then we talked about these new contracts. I think there was some confusion like, oh, is this business they already had? No, this is new business. This is organic business. I think when I look at the VA contract, I think it's a true validation of our company, right? So there was a lot of competition for that award. There's a lot of great labs out there that do hereditary cancer testing. So we don't know who all submitted for that award, but we know it was a lot of labs, and they chose Fulgent, right? They could have chosen someone else, but they chose Fulgent. And I think it's a validation of our company. Why did they choose Fulgent? They don't really tell us, but we know what we sold on, right, our turnaround time, our quality, our informatics, how we handle the difficult areas of the genome. We do have proprietary algorithms and misalignment tools and variant calling tools that are proprietary to Fulgent. So maybe 99% of the genome is pretty easy to address, right? It's pretty straightforward. But there's 1% of the genome that's really hard to interpret, pseudogenes and things like that. And we take it to that next level and do a good job with the 1%. Those numbers aren't -- it's not truly 1%, but you kind of get the point. So we're happy to win that award. We're honored to win that award. And it is a hunting license, you're right. So now like I said, up to $99 million over 5 years. What that means is now our team can go to the hospitals, let them know, hey, we won the award. We're your approved vendor. We need to set them up as a customer, right? I get them on our portal and get them our kits and tubes and [ FedEx ] things, just logistics, right? But we believe the demand is there, right? I mean we believe the demand is there and the guidelines have moved that way. There was also another RFP for the solid tumor part of the business. We didn't win that. We applied for, it didn't win. We don't win everything. But another great lab won the solid tumor. And I think what you're seeing -- and we won the hereditary. And what you're seeing today from the medical guidelines is what they're saying is patients with cancer, you should do solid tumor and hereditary. So you've got 2 great labs that are serving the VA now, 1 doing the solid tumor, Fulgent doing hereditary cancer. So we believe the tests are in high demand. Our team needs to get out there, set up those accounts, get that volume rolling. It's hard to say how much revenue we'll recognize next year because we just won this, right? We hadn't even gone really live yet. But I think by the time we announce Q4 and we start talking about 2025 guidance, we have some pretty good visibility into the VA.

Okay. Perfect. Before I switch into Fulgent Pharma, which is not a part of the business, I do want you to touch on reimbursement. Lots of news in the past few weeks. Maybe just give us a little bit more your house view in terms of what the current environment is getting better, getting worse or relatively stable?

Well, Look, there was 1 event, right? One event, right? There was a large commercial payer -- I mean, it's all public, right? It was all press released. UnitedHealthcare came out and said, we're not going to pay for pharmacogenetic testing. And then a publicly traded company was hit pretty hard, right? Maybe others, I don't know. So it was 1 event, 1 payer, 1 test. Certainly -- I don't agree with it, right? I think pharmacogenomic testing is extremely valuable, right, to patient care. And by the way, our VA contract does cover PGx as well. But that -- the VA contract doesn't rely on third-party reimbursement. So I think that was an isolated event. I don't understand the rationale, the thought process there from the payer. But again, I think that is a test that provides a lot of clinical value. And so it didn't affect Fulgent really at all. We don't have really any third-party reimbursement for pharmacogenetic testing. Most of our PGx is now through the VA, for example, and we have hospital contracts where the hospitals are working directly with us, maybe some B2B as well. So that event didn't affect us, but not a move in the right direction for the industry and hopefully kind of fixes itself over time.

Okay. But you don't see any pressure in hereditary cancer testing. That has been the news for like maybe past few years.

Yes. I mean, I guess, maybe in terms of rates coming down a little bit. On the hereditary cancer side, we don't see any changes in coverage. I think it's getting better, right? So I think coverage is getting better. But I think maybe some other companies talk about rates coming down, but I don't know, it happens, I guess. CMS goes through cycles where they'll lower rates a little bit. And a lot of contracts, like commercial contracts are based on the CMS rate. So if CMS comes out with a little bit lower price, it has a ripple effect, right? But it hasn't affected us too much.

Good. Great. So let's definitely switch to Fulgent Pharma, which is the other part of the business, Dr. Yin. So maybe can you share a little bit what kind of application that you guys are developing using the nano delivery -- nano-drug delivery systems?

Yes. So this is a platform originally I developed in the army for countering biological and chemical agent. And then when I started the company, we started working on the cancer drugs. And so our first drug demonstration using the same platform is paclitaxel or FID-007. And right now, as you know, it's in Phase II stage, and we're very encouraged with the preliminary data. Right now, we dosed 9 patients. We're supposed to have about 40 patients by the end of next year to finish the P2 trial, and then we're going to start the registration trial. And -- but among the 9 patients dosed, we have 6 patients that had scan data. But I can't talk too much detail, but we're very encouraged with the data. And the most important thing is we also saw the continued no neuropathy side effect issues, which often seen by the Abraxane and other paclitaxel drugs. And this is the extension of our Phase I and Phase Ib, which we didn't have that problem, and we'll continue to see, which is very good sign. And this is in a very specific focused cancer patient, head and neck squamous cell carcinoma area. And the other interesting part is the -- these head and neck cancer second line is wide open after KEYTRUDA and chemo and many of the second-line trials failed because KEYTRUDA turned out to be such a super immuno-oncology drug, which basically poked the immune system already of the patient. So any other immuno-oncology drug coming in is basically not going to be effective. So everybody coming back to look at the chemo possibilities, but there are no new chemo developed, particularly the chemo like us with very good efficacy and also very much lower toxicity or safety issues. So that's becoming very, very interesting, and we're very encouraged with this trial, which in combination with cetuximab. And so the result is extremely encouraging. And so we hope to publish interim data by -- in June ASCO meeting, so that you have a first sort of look at our data and to share the interesting excitement we have. And our second drug using the same delivery technology is [ nano SN-38 ], as you know, and this is to be filed in late December or early January time frame or January time frame in 2025. And it is targeting the irinotecan-resistant tumor. As you know, irinotecan is another very broad spectrum cancer drug which treating a workhorse for treating the lower GI tract cancers. And -- but the problems like FOLFIRINOX, they are first line in combination with other chemo drugs. The problem is that when patients develop the resistant tumor, they're really not a good way to solve these problems. And our preclinical data show this nano SN-38 in which SN-38 is the active component of irinotecan, except people couldn't really formulate them. For years, nobody actually made the drug, where we'll be the first one if we can make it successful. And we can overcome the irinotecan-resistant tumors, which is going to be quite interesting because this is such a broad spectrum. There are many cancers like colon cancer and ovarian cancer and everything, even prostate cancer utilize irinotecan, not mentioning the other cancers. So this is such a large unmet market, which are going to bring the second wave of our sort of asset. And the third one is actually a broad platform. It's also extension of same polymer technology from these delivery system, but we use them as a linker for antibody-drug conjugate, along with our newly invented payload family. And so we're targeting not only the established target ADC targeting established target, but also the brand-new targets and as basically new drug therapy. So the third asset is really not a single drug anymore. It's actually a platform. You can plug and play, I mean, and turn maybe 12 targeted ADCs together at the same time using the same linker and payload technology. And if you follow the ADC area very closely, you will know this is a heavily patented area. It's very, very competitive. And Merck paid $22 billion to license 3 ADCs from Daiichi, just get a chance to play in the field. And not mentioning, the other big pharmas also spend a lot of money, BMS, Amgen, all licensed the technology. So we're very fortunate to have our own brand-new portfolio of patents, not only 1, but a portfolio of patents over the years overlapping each other. And -- so we're very excited with this opportunity as well. Hopefully, we soon are rolling out the ADC targets as well.

Got it. So I know that it's still pretty early to talk about it, but thinking about long term, how do you want to commercialize that technology? Do you think about like you doing by yourself or you are more like a partnership type of in terms like model? Like anything?

Yes, that's a great question. For example, FID-007, as we see more and more, I mean, exciting results, and then there will be a better chance for partnerships. And as Brandon explained to you earlier, we have a lot of cash. We may be to fund like 1 or 2 of the Phase III drugs, but if we partner with them, maybe we are able to fund 3 of the Phase III -- I'm sorry, more even 5 or 10 of the Phase III opportunities because the platform can pump in more drug candidates, right, so that we can diversify ourselves a lot better. And this is based upon results, this Phase II is very crucial. And hopefully, we're going to see the results sometime next year. And then once people see the good results and they will be more interested in partnering with us, they see the power of the technology platform. And this is only one. And our SN-38, the FID-022, if we're able to successfully file the IND later this year or early next year, so we'll be able to dose patients likely in the second quarter. And by the end of next year, we're also going to see some really interesting preliminary results as well because most patients happen to be -- we collected irinotecan resistant and most of our colon cancer, which is exactly the population we're trying to target, even though we're not allowed to select the patient, but it happened to be the trial that comes with those patients and have those solutions.

Got it. In the final few minutes, Paul, I wanted to touch a little bit on the margin and the capital allocation strategy. As you guys mentioned, $800 million cash on the balance sheet. Do you still want to do another M&A? How do you think about that? And then on margin, gross margin is a pretty good progress right now, but how do you move to the next stage?

Yes. So thank you for that question. On the gross margins, we're actually very proud of what we achieved. We were in the high 20s 7 quarters ago, and now we're above 40% or at 40%. As we focus on expansion of revenues, quality of revenues, continued streamlining, automation, the usage of our technology, our hope is that our margins will continue to grind higher. And then as far as capital allocation, I mean, all of the above. We've invested in our business. We've hired people, bought several companies. We made a couple of investments in the tens of millions of dollars. We also bought back stock. So I mean, the usage of our cash, all the options are open.

Okay. Great. Any final kind of like comments, conclusion comments, like anything that you think investors have been like underappreciate story, yes, anything?

Well, in 5 seconds. Yes, I'm not -- it's hard to say, right? I think we have become a diagnostics company and a drug development company, and we're doing a good job at both of those. That doesn't always attract the same sort of investors, right? So we think maybe there's some disconnect there, like our diagnostics investors doesn't really -- they don't really understand the drug development side and maybe our drug development investors don't really understand the diagnostics side. And maybe that's on us. We need to do a better job telling the story, right? But I think that's probably the area that is kind of creating a little bit of confusion. And look, we know this hasn't been done a lot, but I think the strategies we've taken can be successful. So we'll do a better job telling the story and continuing to show progress in the diagnostic side and continuing to show good patient outcomes on the drug development side.

Great. Awesome. That wrap up our conversation. Thank you all for joining.

Thank you.

Thank you.