GeneDx Holdings Corp. ($WGS)

All right. Good afternoon, everybody. I'm Luke Sergott. I cover life science tools and diagnostics here for Barclays. With me, I have Kevin Feeley, CFO of GeneDx. Thanks again for making it. It's always a pleasure to have you guys here.

You guys have been -- over the last couple of years, just been executing against our commercial targets, right, continuing to build out the platform. Why don't you just kind of walk us through the transition that you've had -- or not the transition, but the momentum that you've been building over the last couple of years, and where you are now and kind of how you're positioned there to jump off into '26 and beyond?

Yes, and thank you, everybody, for being here. I mean, GeneDx has operated for 25 years with a focus specifically in solving the world's hardest-to-diagnose cases around rare disease. For the past several years, really focused for the first time since 2021 with full commercial efforts behind our flagship whole exome and whole genome sequencing technology, a technology, we spent the better part of the last 2 decades refining. The core of the business had been expert clinical geneticists in the United States and about 2,000 of those really utilizing exome and genome as a last-in-line diagnosis for those hardest-to-crack cases. Most people over the past 2 decades hadn't heard of GeneDx unless you were a global expert in genetics and rare disease, and GeneDx is really where you went when you were searching for an answer. What we've embarked on over the past several years is to move the utilization of those tests outside of just the pure expert space, beginning in 2023, launched into pediatric neurology as the first of what over time will be a wide array of pediatric specialists and eventually adult specialists as well. An exciting time for us to moving beyond specialty call points. It was summer of last year, the American Academy of Pediatrics updated their genetic testing guidelines for the first time in 11 years, calling for exome and genome to be a first-line diagnostic for children with global intellectual and developmental delay. And so a company with a long history, but really just a couple of years now of proliferating the use of exome and genome into standard of care across multiple different physician types. We're embarking on an investment cycle to expand the commercial team to go after what we think is ultimately going to be a massive market that embeds genomics into the medical stack around the world.

And so when you guys talk about your overall market, you break it into foundational expansion into the future markets. Can you just level set and briefly describe what you mean by those before we start digging into the details of each?

Yes, happy to. Those foundational markets are those that we have most experience with, that being clinical geneticists, there's about 2,000 expert clinical geneticists in the United States, pediatric neurologists, about 2,000 pediatric neurologists in the U.S. And over the past several years, those have really been the primary outpatient call points that we've been actively engaged with. What you see in 2025 is that overwhelming majority of all volume and revenue coming from just those 2 call points with some contribution from the neonatal intensive care unit. But those 2 markets making up what we think is a foundational base of experts and foremost specialists with respect to the use of geneticists. And then going forward, still a lot of room to grow there. 8 out of 10 clinical geneticists order their exome and genome from GeneDx and have for many years. And so fairly well established and entrenched with a strong market share in terms of clinician counts. But even those foremost experts were still only ordering for about 1/3 -- exome and genome for about 1/3 of all patients they see. Now you'd expect every patient a geneticist sees to ultimately get a genetic test, but today, they're still very much entrenched with ordering single-gene tests, multi-gene panels. And so a lot of runway to growth for multiple years to come even in that area most core of expert geneticists by converting the use of genetic tests from panels and into exome and eventually a whole genome backbone for all. And in terms of pediatric neurologists in that foundational market, about 1/3 of all pediatric neurologists at this point are ordering exome and genome from GeneDx. So still a large runway of activating more ped neuros. It will take several more years for us to accomplish filling up that bar close to the 80% market share we have in geneticists. And that cohort of ped neuro are still ordering for about 15% penetrated in terms of patient TAM. And so we'd expect over time to continue this evolution of a replacement cycle of single-gene tests and multi-gene panels, with strong growth to come even in that -- those foundational markets, which have been where we've been commercially focused. On top of that, we're now 2 years into commercializing the neonatal intensive care unit. We think, ultimately, there should be north of 200,000 tests a year ordered in the NICU. We've got about 25% of those NICUs with active accounts ordering at some small levels from us today. But the standard of care today is having a reality that about 5% of all patients in the NICU are getting any genetic tests. We know what good looks like there. It's what Seattle Children's is doing. They outlined that in the study we released a year ago called SeqFirst, in which they're ordering a rapid genome on 60% of all babies in their NICU and seeing the clinical and economic benefit from that. And so still in the very early innings of what are those 3 call points, which is the entirety of what we called upon in fiscal 2025. And what we've outlined recently is a number of markets that we'll be expanding into, notably the prenatal space with the use of a late-term prenatal exome or prenatal genome, that's a diagnostic level test, and the largest market of all, the general pediatrician on the back of those AAP guidelines released last year.

All right. And so going back into the foundational market, this has been kind of the workhorse of your business right now. 80% penetrated on the general specialists or the general -- or the generalist and then you have the specialist there, lower penetration. But like you said, like something like 15% of patients. Why? I mean, what's the -- I mean, clearly, these doctors are using it, but not using it enough or using it with all their patients? What's -- why not? Typically, you see them adopt something and it's like, okay, we're just going to use this with all the patients. We check the box. We get -- I mean they're not getting paid for it, but it's -- I don't understand why there's just such a hesitance or inability to penetrate that patient population.

Yes. So it's a great question, and it mostly comes down to education and our ability to repeatedly get in front of those physicians to bring them up to speed. There were old realities around exome and whole genome sequencing that are no longer true, that being that only an expert clinician, a geneticist could understand the results of these tests and that these tests take weeks, if not months, to produce. And that they were so expensive that they were cost-prohibitive. And that's frankly what GeneDx has aspired over the past decade to solve for. We've gotten turnaround times and cost and complexity down towards parity with multi-gene panels. And frankly, that's new news for many clinicians outside of the genetic space that we run into. And so dispelling what used to be old realities that are now myths is part of the education process. I think there's entrenched behavior. All of us in health care, there is many steeped in all forms of health care in this room know that's changing doctor behavior is one of the hardest things to do in all of health care. And so those doctors who have been accustomed to running single-gene tests or multi-gene panels for certain symptom types or hypothesis, getting them to change behavior just takes time. And again, repetition to get back to the physician's office to make sure that they're staying abreast of the technology advancements that have been immense over the past decade. And then third, some of this is in our control. If you look over the past 3 years or so of commercialization efforts on our part, we really were just focused on a few specific diagnosis codes or indications, namely symptom types and disorders around autism, epilepsy and intellectual developmental delay, not because those are the only disorder types that our technology can diagnose, we can and do span the spectrum of all rare disease. But those are areas specifically where we saw that guidelines were in place, and therefore, had influenced payer policies already, and there was a fighting shot to get paid fairly for our services. I think what's incumbent on us to further develop the market is continue to bring clinical evidence and economic evidence to payers, whether those payers are Medicaid programs or commercial payers, to open up the aperture of coverage. There's been an emergence of guidelines over the past half decade. We don't expect that to slow down at all, and that will further make it appealing enough for us to go target to bring volumes in. At the end of the day, an exome or genome is a better test. It's a better mousetrap than a multi-gene panel. That is well understood by physicians. We want to make sure that before we meaningfully take on that volume that there's an ability to get paid and that will continue to improve over the next half a decade here.

Yes. And I was just about to ask about the clinic. Is it like that they doubt the clinical utility of it? I mean I know you have like specific test indications themselves, but how much on that piece is of the education? And then once you get -- that feeds the reimbursement, and then they're like, oh, okay, this has been vetted. Is that kind of how the path here to adoption to the tests have come?

Yes, I think what we've seen is, sometimes it takes multiple visits that repetition to first, like I said, dispel those old myths about the test to then try and influence changing behavior and ultimately then proving that demands to payers is what really gets them to move the needle on reimbursement coverage. Clinical data, economic data helpful, the biggest tool in the tool chest is always physician demand. And so that will mean, in certain situations, bringing on volume prior to reimbursement being in place, but that's an important part of the dossier to influence the emergence of more coverage for more patients and ultimately, that's what we're in the business of doing.

And so as you guys are -- you exited the year with, I think, 50 reps in this business, adding 25 more. Your guide embeds 25% to 27% on this side from a volume growth perspective here. Walk us through the assumptions? And is this really just about -- how much is, I guess, efficiency on existing reps versus just adding on the onesies and twosies from the new reps?

Yes. So if you look at the outpatient setting, those foundational markets, last year, we really went about with roughly 50 reps, 50 bag-carrying sales reps. That team calling on specialists, geneticists, ped neuro and additional specialty types. So think specialty types like pediatric cardiologists. That team will go from 50 to 75 or has already here in the first quarter. And that allows us to layer on those additional call points of new specialists. While at the same time, they will stay turning the crank on what we see as large pockets of growth still to be had in that inner most core of those foundational markets. So geneticists, continuing to improve utilization rates to get them to order these tests for more and more of their patients. For us and the geneticists community, with 8 out of 10 are already ordering from us, it's not about winning new accounts, but it's improving utilization at existing accounts, and that will continue. At ped neuro, like I said, there's still about 2/3 of that doctor population that we've yet to reach. We've been in that call point active for 2.5 years now. And so the additional heads will allow us to accelerate knocking on more doors, go through that education process, activate more ped neuros and continue to improve the utilization rate there while also giving them those additional call points of additional specialty types. So if you look at the components of what we guided to, 33% to 35% volume growth, good 25% to 27% of that is coming from those foundational markets alone, which have multiple years to continue to mature into.

Yes. Okay. On the -- and moving on to the expansion markets here. You talked about your general peds, your NICU, I had to write them all down here [indiscernible], prenatal, your adult specialists and the international. I think that from the adult specialist international is more kind of outside of what your core has been. So focusing on like the general peds, the NICU and the prenatal. I remember we talked about NICU last year, and it's just like notoriously tough market to penetrate. And your -- I think like the utilization is probably -- is it -- I'm not going to put words in your mouth, but was feeling was it was worse than even the utilization from like the specialists and geneticists above? Like can you just walk through why that's such a difficult market? And why -- again, like if you're in the NICU, that is a very motivated patient population to figure out what is going on. And so, I mean, I totally would be like, "I don't care, give me to test. I want to know what's going on." So why isn't it like we're seeing that pick up more meaningfully?

Yes. And it's really a market we began to commercialize in 2024. 2025, a number of key milestones, starting with that SeqFirst study I mentioned earlier, came out in February. We think that's a definitive clinical marker. We launched the health economic tool for use by hospital administrators to prove the ROI on the test in spring of last year. We began a path of implementing sites onto Epic Aura last spring. And it was in April of last year, we launched a 2-day turnaround time in the NICU to supplement the 5-day. If you look back at fiscal '25, overall volume flows did fall short of our expectation of where they were a year ago. But underlying that was a really good sign in terms of account activations. So we now have more than 25% of the target 800 Level 3 and Level 4 NICUs with a signed contract at GeneDx and actively ordering. What we saw in '25 on the heels of an approach to work top-down through hospital systems, working through the C-suite of the hospital, whether it's the Chief Medical Officer, the CEO, the CFO, bringing attributes that they would all be most interested in, a lot of success at activating that level of the hospital to understand the clinical and economic benefits, signed contracts. That was the bright spot. Where we fell short was in improving utilization rate within those NICUs. Standard of care today has them ordering for about 5% of their births. And like I said, we know what good looks like. It should be closer to 60%. What we're supplementing this year as a key lesson learned is, of course, we will continue that top-down approach. But inadvertently, I think, where we can and have already approved is putting in additional resources on the ground towards bottoms up to engage with folks on the floor of the NICU, so the neonatologists, the neonate nurse, the Department Chair and Department Head, work with them to ease the implementation burden, not relying on having a contract alone, but ensuring that we're working actively to educate, to help with protocols and ease the implementation in order to pull volume. That's a new go-to-market approach for the past couple of months, and we're starting to see early signals that the utilization rate in those NICUs are picking up in that regard. But there's no doubt there's a long cycle to work both top down and bottoms up to influence what is a fairly radical change in care across those neonatal units.

And are -- so from the bottoms up side, is it kind of, all right, we've laid the groundwork on the top down and the 25% of the 800. That's where you're going to deploy more of the commercial hand-to-hand combat in the NICU where you already have some presence in buy-in from the C-suite and management. And then those guys -- and then those sales and BD people will go out and just continue landing. It's like this land and expand in both...

That's exactly right. That's exactly right. And we're starting with the supplemental team, but we added 10 reps in January specific to the NICU. And as you laid out, the fertile ground for them would likely be those accounts that we've already activated while, in parallel, we continue to sign more contracts and activate more accounts.

Got you. Got you. And then on the general peds, you just -- you're adding reps across the entire business here. So you're adding, I think, 50 more here or you have a dedicated team with 50 and you're adding more in this -- like how does the general pads like -- it feels like all these like submarkets are completely different in siloed and at risk of boiling the ocean all at the same time. I mean, why is this -- like why do you need to be in general peds and then NICU? And how do they all talk to each other and feed into each other?

Yes, it's a great question. And they are very different. There are different characteristics around education levels that are necessary and then what it will take to win in each of those. And so one thing that we've done intentionally to avoid distraction factor is that specialty team that calls on the outpatient specialists segregated from the prenatal team calling on maternal fetal medicine segregated from the team calling on general pediatricians and the NICU. Obviously, they work together. They share knowledge and insight. There's some share functions around marketing and leadership, but those are all dedicated sales teams. Rather than try to have a rep who could be good across all of those, we want the people engaging with our clients to be steeped in what exactly makes those positions tick. That's also gone into the hiring plan. So if you look at the near 100 heads that we added, for the first time, not just adding folks with specialty diagnostic experience, take general pediatrician, for an example. Yes, of course, we brought on some experienced general diagnostic reps in that space, but we've also brought on people who maybe don't have diagnostic experience, but they've been selling therapeutics or vaccines or other products to pediatricians, who understand how those offices tick and the phenotype, no pun intended, for those specific types of doctors. And yes, I think there's a call to say, well, why go into all of those now versus take one at a time? I think, at the end of the day, there is a large unmet need. There's only GeneDx we think, in large part, that can solve for some of that at the moment. If you look at our diagnostic quality, our turnaround times, the end-to-end customer experience, we think it's necessary for us now to invest in taking market share to extend the leadership position we have in genetics, as I said, 8 out of 10 ordering from us, we think that expert support is going to carry forward as we move into the non-expert space. And we're in a unique period of time where we're ready, willing and able, and we think uniquely capable of making a big bet to enter into these new markets.

And it seems like -- so you're putting a big bet into entering in these markets. You're investing a significant amount of capital. Talk about the pull from the market side. Like what are the catalysts coming up this year that are going to help unlock this because it can't all just be on your side?

So in the general pediatrician market, the largest, we'll start there. We've done extensive research. We've been engaged with that community since guidelines have come out, focus groups, qualitative, quantitative research. I think all of that tells us that these physicians can and will be orderers, but they've outlined for us criteria, both on the front end and the back end of the diagnostic process in terms of user experience that they need to see. And so we've committed to a next-generation customer experience, effectively take the burden of a fairly lengthy ordering process off of the physician and the physician's office. That will release later this summer. And on the back end, a report that is more tailored for nonexperts, easier to read, easier to understand and digest and more so how do we arm the physician so they don't feel exposed without the knowledge to explain the diagnosis to a patient and more so what to do next with that diagnosis. And so part of a suite of customer experience enhancements coming out later this summer. To us, that's really the starting gun for the market to really open up. And so we'll keep a milestone there to be on the lookout for. That experience is in beta testing now, being beat up fairly extensively by pediatricians. It will be designed and built for pediatricians by pediatricians. And like I said, that's in beta testing now. On the prenatal side, we did launch a new product into that market in February. That was a prenatal genome. It supplements a prenatal exome that we've had on the menu, frankly, for many years now and have been seeing organic volumes despite the fact that never actively calling on MFNs, we started to see demand come through in terms of orders of that prenatal exome. That was really coming organically, word of mouth, peer-to-peer exchange at their conferences, them funding GeneDx. So what it told us is we were having good success selling that product without even trying. We ought to try, and so we built out a team of 10 to get to learn the market. And I think periodically throughout the year, we'll be coming back to say what are the signals and lessons learned in the first couple of quarters to identify when is the right time to expand that sales team. The team of 10, certainly, you can envision larger. If you look at what is the go get there. About 4% of all births in the United States have some level of abnormality flagged whether through ultrasound or some other diagnosis that would make them a good candidate for this test. It's about 150,000 tests a year. So to knock on all those doors at some point, you'd expect a larger team. So another key watch out for us throughout the year is just a signal on how that market is developing. And then, of course, the NICU, we want to be able to report back definitively that step-up in that utilization rate towards what we're seeing in SeqFirst is starting to become a big reality.

That's great. Thanks. And I really appreciate the time and that's all. So we just kind of ran blasting right through and we ran quickly.

Thanks for having us.

Yes. Thank you.