Caris Life Sciences Inc (CAI) 2025 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to the Caris Life Sciences Q2 2025 earnings call. My name is Kevin, and I'll be your coordinator today. (Operator Instructions) Please be advised today's conference is being recorded. I would now like to hand it over to Narendra Chokshi with Caris. Please go ahead.

Thank you, operator. Earlier today, Caris Life Sciences released financial results for the quarter ended June 30, 2025. Joining from Caris today are David Halbert, Chairman, Founder and CEO of Caris; David Spetzler, our President; Brian Brille, EVP and Vice Chairman; and Luke Power, our CFO. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

These risks are discussed in our SEC filings, including our prospectus filed with the SEC in connection with our IPO and our quarterly report on Form 10-Q to be filed later today. Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release issued today. A copy of today's presentation materials can be found on our Investor Relations website.

I will now turn the call over to Brian.

Thanks, Narendra, and thank you all for joining our second quarter 2025 earnings call. This is our first earnings call post our June IPO, and we're very enthusiastic to begin reporting our results publicly. I'd like to start this call by expressing our gratitude to all of our investors who participated in our recent IPO as well as the investors who have supported our previous private financings over the past seven years. The IPO was a significant milestone for us. We are deliberate about waiting for various elements of our strategy and platform to be in place before going public.

We are pleased to finally be public, and we believe that we are in the very early innings of our company's remarkable journey. As Narendra mentioned, we're joined today by David Halbert, our CEO and Founder, who had an exceptional run previously as CEO and Founder of Advanced PCS. Without David's vision and personal funding, we would not have been able to build Caris Life Sciences with a truly long-term and strategic perspective. Dr. Spetzler, Luke and I will present our results, and all four of us are available for questions after this presentation.

Let's start with our mission on Slide 2. We are focused on delivering on our founder's mission of making precision medicine a reality. We believe that the breadth, depth and scale of our tech platform, whole exome and whole transcriptome in one universal assay is a highly important competitive edge. both from the perspective of providing optimal clinical utility, but also the generation of uniquely valuable data. Moreover, our Caris Assure Blood assay is designed to provide the same technology across the continuum of cancer care, including therapy selection, MRD, monitoring and early detection.

Our long-term strategic perspective and the early investments we made in our tech platform have enabled the results that we are pleased to present today. We've had an outstanding first half of the year and second quarter with second quarter total revenues increasing 81% year-over-year to $181.4 million. As shown on Slide 3, this result was driven by strong performance from both clinical profiling as well as pharma R&D services. Molecular profiling services revenues increased to $162.9 million, representing an increase of 86% year-over-year. And pharma R&D services increased to $18.5 million for growth of 49% year-over-year.

On Slide 4, with respect to molecular profiling revenue, you can see the remarkable increase of 86% year-over-year, which is driven by consistent growth in clinical case volumes as well as very strong growth in clinical ASP. Clinical case volumes were slightly over 50,000 profiles, representing growth of 22% year-over-year and over 9% sequentially. Caris Assure for therapy selection continues to gain market share and produced a 56% year-over-year case volume growth in the second quarter. In addition, overall ASP increased to $3,256 per profile for growth of 52% year-over-year. This is primarily due to the new CMS rate of $8,455, which took effect retroactively to November 5 last year, the date of MI Cancer Seek's FDA approval.

Following this FDA approval, we launched this novel assay on January 1. MI Cancer Seek is the only FDA-approved tissue assay on the market, which features whole exome, whole transcriptome and its adoption has been excellent. This mix shift to MI Cancer Seek has driven the significant increase in ASP this quarter. It's worth noting that the FDA approval of MI Cancer Seek has also produced other benefits more broadly across private payers, which Luke will describe. In summary, across the board, we have had a very productive second quarter illustrated by the quarter highlights on Slide 5.

The strong revenue performance, combined with the operating leverage inherent in our business model naturally has produced significant margin improvement. And specifically, gross margins improved to 62.7%, up from 37.5% in the second quarter last year. This is driven by several factors, including strong overall revenue growth in both clinical and biopharma revenues as well as lab and other operational efficiencies. It's important to note that our gross margin now properly reflects our MI Cancer Seek's CMS pricing, which is caught up with the tech investments, notably the move to whole exome, whole transcriptome that we introduced a number of years ago. We deliberately front-loaded investments in tech, lab capacity and distribution channel, and we believe the P&L is now very well positioned for sustained, profitable growth.

In fact, with this gross margin improvement, we have successfully achieved a major milestone in our path to profitability. And in this quarter, we generated positive adjusted EBITDA of $16.7 million as well as positive free cash flow of $5.9 million, and Luke will expand further on these important developments.

In addition, our balance sheet has been strengthened substantially with the June IPO, which raised net proceeds of $519 million, including the greenshoe, together with the April crossover round, which raised $159 million in net proceeds. We finished the quarter with $723 million in cash and marketable securities. Accordingly, we believe that the significant strengthening of both our balance sheet and P&L provides us with strategic flexibility for ongoing investment to develop Caris' extraordinary opportunities in MRD, monitoring, early detection and other markets as well.

Slide 6 illustrates the consistent and systematic growth that our team has generated in clinical profiling over many years. We've grown clinical case volumes at a CAGR of 28% over the past five years, and this growth rate has continued in the first half of 2025 at 26% year-over-year. The sustained case volume growth reflects several factors. First, the unparalleled breadth and depth of our (technical difficulty) 23,000 genes, DNA and RNA continues to resonate with oncologists, KOLs and cancer center leadership. In addition, our differentiated strategic coverage as well as research orientation, the Caris Precision Oncology Alliance, for example, provides us a competitive edge in the market.

Finally, we believe that the therapy selection TAM continues to expand with new indications as well as ASP growth. And most importantly, we believe that the penetration rate for CGP remains relatively low at around 30%, providing us with growth opportunities to serve more physicians and patients with superior technology over many years to come. We also benefit from strong operating leverage associated with our established distribution channel, seasoned sales force and strategic relationships at both the institutional and oncologist level. We are now consistently reaching approximately 5,500 oncologists across the country. In addition, there are other technological efficiencies such as EHR integration, which have further enhanced the pipe connectivity with our clinical client base and have facilitated case volumes.

We are now EHR integrated with approximately 2,500 clinical sites and over 60% of our orders are transmitted electronically. As you can see on Slide 7, the Caris data set has continued to grow, driven by our clinical profiling activity and now exceeds 900,000 genomic profiles and 600,000 matched profiles. Since every profile has been generated with whole exome, whole transcriptome technology for many years, our data set features 529,000 exomes and 580,000 transcriptomes. This gives our data set tremendous power for our own internal product development and continues to enhance our attractiveness as a preferred research partner for both academic medical centers as well as biopharma. The growth of the Caris Precision Oncology Alliance also continues, as shown on Slide 8.

This quarter, we welcomed LSU's LCMC Health Cancer Center to the POA as our 97th member. This growth illustrates the continued strength of the alliance as well as the scale of the overall POA collaboration. The POA members benefit from access to our CODEai genomic data set as well as the opportunity to publish with us and collaboration has proven highly productive with a cumulative total of over 1,100 peer-reviewed joint publications. Finally, we published a landmark Caris Assure platform study, which demonstrates both the power of our whole exome, whole transcriptome approach as well as the potential for this universal assay across the continuum of cancer care.

I'll now turn the presentation over to Dr. Spetzler to discuss this landmark study, along with a brief update on our exciting pipeline. David?

Thanks, Brian. We were very happy to see this study published as we wanted to demonstrate the power of our universal approach across the cancer care continuum utilizing a single assay. I will touch on some of the highlights from our approach, and these are reflected on Slide 9, which also incorporates AI-powered insights that leverage nine distinct feature sets, including liquid biopsy-specific features like Fragmentome, Motifome, Entropyome, PositionomeNU and PositionomeTF.

For therapy selection, we observed high concordance, a PPA of 93.8%, PPV of 96.8% in detecting driver mutations from blood samples compared to matched tumor tissue, especially with CHIP subtraction. In minimal residual disease and monitoring, the platform accurately predicts disease recurrence with patients predicted to have an event showing significantly shorter disease-free survival, with a hazard ratio of 33.4, a p-value less than 0.005 for MRD and a hazard ratio of 4.39 with a p-value of 0.008 for monitoring.

Importantly, this is achieved through a tumor-naive approach, removing the need for prior tumor tissue sequencing. The publication will support continued engagement with MolDX on MRD reimbursement for CRC, and I'll provide an update on this in a few moments. For early detection, our platform demonstrated sensitivities for stages I through IV cancers of 83.1%, 86%, 84.4% and 95.7%, respectively, all achieved at a high specificity of 99.6%. We believe these sensitivities compare very favorably against all other industry data. Again, it was great to get the study published and demonstrate the strength of Caris Assure as our universal assay and our unique approach allows us to learn from all clinical samples in developing our pipeline as this flywheel allows us to be efficient with our R&D resources, which can be seen by our R&D spend remaining flat year-over-year.

We also had a productive past few months on the publication front, and we have highlighted some of these on Slide 10, along with a summary of the purpose of the publication. One in particular that I will call out briefly is our GPS AI paper, which is an internally developed AI tool we utilize in determining cancer of unknown primary and correcting misdiagnosed cases. We also run this on every tissue case at no additional cost to the patient's insurance provider and no additional specimen requirements. And this led to a diagnosis change in 704 patients through the first eight months of the study window. And these changes led to altered therapy eligibility based on Level 1 clinical evidence in 86.1% of the cases.

That has a huge benefit on ensuring that patients get the right treatment at the right time. And we believe as we continue to leverage our best-in-class data set that these AI tools will become more and more prevalent and continue to make our solutions more proprietary and ultimately providing better outcomes for patients across the whole care continuum. Moving to Slide 11, I'll give a quick update on our pipeline. As demonstrated by our existing solutions, we always take a comprehensive approach when developing new solutions, which is driven by the mom rule, treating every patient as if they were your mom. And everything on this slide continues to demonstrate that with some exciting advances.

We are not guiding to potential launch dates until we have made it through various milestones, including obtaining reimbursement, but I will provide a quick status update on all of the below. For MRD, adjuvant colorectal cancer, with the paper published, we are currently working on submission to MolDx. The initial study was performed with approximately 44 patient samples, which was not designed to establish the clinical utility of MRD, just that our performance is similar or better than existing solutions.

After we submit, we should be able to provide a clear update and feedback on MolDx. In therapeutic monitoring, we have run samples with four time points from 190 patients from the MONSTAR-2 trial with our Japanese colleagues at the NCC in Japan, and it provides across -- and it spans across a variety of solid tumors minus lung.

We currently believe that this will be our next MolDX submission once we get CRC submitted in the adjuvant setting. We are taking a different approach with early detection with our initial focus being on breast cancer. You can see from our published data that we have a differentiated platform and great initial performance for MCED due to our WES/WTS approach, and we will continue to refine this ahead of any potential launch. We do not currently plan to seek third-party reimbursement for this and would initially launch as self-pay with either a commercial partner or through our existing distribution channels. Our heme assay will be whole genome and whole transcriptome, leveraging our experience in solid tumors.

We are very excited about this and the potential impact this can have on patients with hematological malignancies. We are currently running internal validations and we will provide updates as we get further data. Our unique approach to running the buffy coat within therapy selection and because we are already measuring CHIP, supports the potential to add germline to our suite of offerings, and we are currently working on validating this solution and will provide further updates as we progress.

And finally, for Clarity breast cancer recurrence, you saw from our press release last October that we have partnered with ECOG-ACRIN Cancer Research Group to interrogate the landmark TAILORx breast cancer trial, along with obtaining data and samples from the National Surgical Adjuvant Breast Cancer and Bowel Project. As part of this, we have completed sequencing about 8,000 samples that were initially used in the original TAILORx trial, and we are developing a digital pathology solution from this data that could have potential in determining the expected breast cancer recurrence in the ranges of 1 to 15 years.

Similar to the above, as we progress, we will provide further updates publicly. You can see there is a lot we are working on, and we are very excited for the next phase of our pipeline and utilizing our vast data set that Brian mentioned earlier.

I will stop there and now pass it over to Luke. Luke?

Thanks, David. Brian mentioned some of these already within the highlights. And as you can see within our earnings release, we've also provided a summary metric table that will cover a lot of these points. So I'll be relatively brief ahead of opening it up to questions. Moving to Slide 12, starting with revenue.

From a year-over-year performance standpoint, we had exceptional organic revenue growth in the second quarter with total revenue growing 81.3% versus Q2 of last year. And this was led by our growth within the molecular profiling business line, which saw an 85.9% growth over the prior year. There are two factors driving this growth. Obviously, our volume continues to be strong across therapy selection due to the great work by our sales teams, but the key driver was our improved reimbursement, which was driven by FDA approval of MI Cancer Seek and the associated reimbursement uplift with that on our tissue solution, along with additional progress and true-ups on Caris Assure for therapy selection. And these ASP walks and true-ups are reflected on Slide 13 for additional reference.

As Brian stated earlier, we launched MI Cancer Seek at the start of the year, and we've been able to ramp up the volume from this solution as we progress through the first half of 2025 with MI Cancer Seek representing approximately 78% of our tissue cases in Q2, which was up from 54% in Q1. This has allowed us to get to an ASP north of $3,000 a case quicker than expected and provides a great tailwind as we transition into the second half of the year.

We continue to see excellent progress with national commercial payers due to medical policy updates and medical policies that cover FDA-approved assays, which has facilitated additional contracting. We also saw good progress on our pharma line of business, which grew 49.1% to $18.5 million for the quarter. Our goal for pharma is to enter into long-term partnerships that are multiyear, and that continues to be our focus going into the second half of the year.

These revenue numbers obviously had a very positive impact on our gross margin for the quarter, which was 62.7% and up from 37.5% in the second quarter of 2024 and was the result of the excellent work by our lab teams in maintaining operating efficiencies with the increased volume, along with the ASP improvement and the pharma revenue growth. You will also see this great trend on Slide 14, and we believe with the step-up in ASP and our initial revenue guidance that we can achieve our goal of getting to 60% gross margin for the full year of 2025, which would be an increase from 43.4% that we had for 2024.

From an operating expense standpoint, we continue to demonstrate excellent operating leverage and the 26% ramp year-over-year was primarily driven by stock compensation and RSUs that vested upon the completion of our IPO, with stock compensation expense contributing $23.8 million of the $27.1 million increase reflected on this slide. With the IPO, you'll also see in this quarter that we had some large onetime material noncash transactions that hit our net loss and our EPS. And these were the result of the conversion or exercise of the various equity instruments to common stock upon our IPO, and we've called these out in our earnings release.

Since these have now all converted to common stock, we do not expect this sort of unusual transaction to occur going forward. The last item I'll comment on from this slide before jumping to the guidance slide is free cash flow. Q2 was great in this regard as we achieved positive free cash flow for the quarter in the amount of $5.9 million, and this was aided by getting all our payments cut up from Medicare, which I'm happy to say has been completed, and this catch-up is disclosed in our earnings release.

Those who are familiar with our history will know that we achieved free cash flow breakeven before back in 2018. But in late 2018, under David's direction, we purposely took the goal of developing our whole exome and whole transcriptome platform, which, while more expensive, followed our philosophy for being patient first regardless of cost since we have always believed that more information is more power, and we want to provide more power to patients and their physicians in the battle against cancer.

So while we have some catch-ups in Q2 on the payment side, you can still see the dramatic improvements we've made in cash burn by comparing the first half of this year with a free cash flow burn of $28 million versus the first half of last year when we had $141 million of free cash flow burn. We also believe that as we transition to the second half of the year, that we will continue to show improvement, with our goal for the remainder of the year being able to control our burn and achieve positive free cash flow along with continuing positive adjusted EBITDA, while also continuing to pursue the exciting pipeline that Dr. Spetzler discussed earlier. And finally, wrapping up, jumping to Slide 15, I'll give a brief update on guidance. As a company, we will initially provide guidance on total revenue and expect the clinical therapy selection volume basis.

With regards to these, we currently expect our total revenue to be within the range of $675 million to $685 million for FY 2025, which would be a 64% to 66% increase over 2024. And I expect our clinical therapy selection volume to be within 19% to 21% growth for the year. I will wrap up there.

And with that, we'll now open up the call for questions. Operator, over to you.

(Operator Instructions)

Michael Ryskin, Bank of America.

Congrats on solid first quarter out of the gate. I want to ask on the ASP update in the quarter. Really good uplift versus 1Q and just sort of what was expected. Can you talk a little bit more about where you saw some of the biggest jumps? Was it on the Medicare side in terms of getting that realized ASP, the full CDx rate of $8,455? How much progress you made there versus some of the commercial payers on the tissue? And then I've got a follow-up.

Yes. Mike, it's Luke. So yes, so the key thing that drove the ASP for tissue was primarily kind of what we disclosed, the 78% of our tissue cases. That was kind of the number one driver. We did get kind of everything caught up for Medicare, and it's operating kind of as expected.

So that was great. And then the other uptick was on the commercial side. So right now, through the first six months of the year, like we've contracted -- we've had like covered lives greater than 170 million so far in the first six months, which is a testament to kind of the great work our market access team has done. So that's kind of driving the uptick and kind of better than expected for Q2.

Okay. And if I look at the guide you issued for the year and sort of like where you're exiting 2Q, it assumes -- you had a big jump 1Q to 2Q, especially on the ASP front, a little bit more on the volume. It assumes a much more almost linear or almost flat sequential, both on volumes and ASPs to hit that midpoint of around $680 million. Can you just talk to the conservatism embedded there and ability to, again, drive ASPs a little bit higher as you go through the year?

Yes. There's definitely opportunity to drive it higher. Obviously, we've only had about four months of payments so far flow-through of MI Cancer Seek. So similar to kind of our science approach, the more data you get, we believe we'll have greater insights and greater opportunity to drive that further. But we're kind of waiting for the collections to come in.

The way the model is kind of built from an ASP standpoint, because we disclose both our tissue and blood separately, I'll provide kind of what those numbers are. So when we guide to and what I'm going to do as a guide going forward is I'm not going to include any true-ups or anything. So our results for Q2 obviously includes a little bit of a true-up, $7 million true-up for tissue and about $4.6 million for blood. So the way we've kind of built out the model is going from a $3,200 pre true-up in Q2 and adding incremental $200 each quarter for tissue. And then for blood, blood, we had a good catch-up in Q2, but going from the base, which is about $1,900 pre true-up you're kind of incrementally going up $150 to $200 in each of those quarters as well.

So that's kind of how we built it up. And then with regards to volume, volume has been great for the first half of the year. We kind of entered the year being more kind of high teens, mid- to high teens from a therapy selection standpoint. Obviously, as Dr. Spencer has gone through, we have a lot of stuff in the pipeline, stuff we're working on.

So from a guide standpoint, I'm going to kind of maintain that mid-teens, high teens just going forward. But the great thing about the first half of the year is seeing that reacceleration in our tissue growth. Obviously, last year it was about 14%. It's about 19% through the first half of the year. So that was definitely very positive. We think we can continue that momentum into the second half of the year.

Okay. The comments on the true-up are helpful as well. And then one last one for me on the profitability. Congrats on the adjusted EBITDA positive right out of the gate. If I just take your comments on gross margin and how that should be sustainable going forward, it looks like you should be able to stay adjusted EBITDA positive for the rest of the year and go forward. But just any clarity you can provide on that in terms of R&D or sales and marketing, any OpEx spend in the second half of the year that would prevent you from staying positive adjusted EBITDA? And I'll stop there.

Yes. No, Mike, I think we've crossed that bridge now. So obviously, the goal for us is not to maximize our profits or hoard cash or anything like that. We have a lot of exciting things we're working on. So that's the focus. But we don't expect to go back now that we've crossed that bridge in Q2.

Dan Brennan, TD Cowen.

Maybe just sticking on the tissue volume. Luke, since you just kind of addressed it the acceleration in the first half of the year to 19% versus 14% last year. Can you just -- I know you touched upon some of the factors, but pretty impressive. Could you just walk through again kind of what is driving this big pickup and why you think that's sustainable for the rest of the year?

Yes. I think there are two components to that, Dan. So obviously, last year, like we did a big launch with our Assure product, and it was quite unique. Obviously, we have the buffy coat there with the liquid, and there was a lot of education for the field and for physicians. So we kind of worked on that last year.

What we're seeing this year is, obviously, the FDA approval is helping quite a bit with that kind of acceleration. And obviously, the renewed focus from the sales team on both now having both products kind of up and running this year, I think, has benefited us. So going into the second half of the year, again, albeit we kind of started the year with that kind of mid- to high teens. So that's what I'd probably guide to in the second half, with hopefully some upside, but I don't want to guide there.

And Dan, I would add that the macro here, we feel very good about. I mean this market continues to evolve. The TAM is large and growing. It's growing with adoption and education of the physicians. It's going to earlier staging, ASP growth, all of the things you've observed before.

And the penetration rate is still relatively low at about 30%. So that's the market. And then as it relates to us, we feel like we have a highly differentiated platform. The technology is really being appreciated by the marketplace. And our channel is quite special as well with the POA and other features. So we feel great about tissue therapy selection, blood, all of those things before you get to the pretty exciting product pipeline.

Great. And then just maybe one more just back to price since it is so important. Just I know, Luke, you mentioned the number of covered lives on the commercial side. Could you just elaborate a little bit just what have the conversations been like as you engage with some of these big national payers? Have you had any headwinds on that front? Any pushback? And just kind of confidence in that progress continuing in the back half of '25 and into '26.

Yes. So Dan, the 170 million covered lives also includes Medicare. I just want to make sure that that's kind of clarified. Not so far. We actually had very good progress with the commercial component. I think they realize the comprehensiveness of our approach. And one of the other key things that they've kind of honed in on and Dr. Spetzler touched on GPS earlier is these added offerings that we have on top of just the sequencing. So like GPS AI, for instance, like that can actually save and that could be a good guide for the payers because you're getting the patient on the treatment, the right treatment at the right time. So we've seen a lot of positive from those.

And obviously, we have a plethora of other additional IACs -- or not IACs, but AI insights that are going to be flowing over the next kind of 6 to 12 months as well. And I think they're kind of -- they're seeing the comprehensiveness approach actually has a positive impact on them, too.

Vijay Kumar, Evercore ISI.

Congrats on a nice furniture. Luke, maybe just back on -- if you look at the guidance here, the annual revenue guidance, I think you're implying something like $190 million-ish per quarter in the back half. You just did $180 million, maybe some true-up involved up there. What are you assuming for back half? How should we think of any seasonality in the business here versus Q4?

Yes. So like Q4 is normally a bigger quarter for us in terms of pharma. There's always some lumpiness throughout the year, and it's more heavily weighted towards the latter part of the year. So I would expect Q3 to have kind of that lower pharma amount and then step up in Q4. Now obviously, we have a pretty robust pipeline that we're working with our pharma partners on.

So that could change. But right now, that's kind of what we've put in the guidance. So you're looking at a growth rate for Q3 in that kind of 75%. And then Q4, obviously, it's continued to step up from an absolute dollars. But because of the great Q4 we had last year, you're probably in that 60% for Q4 revenue growth rate.

Understood. And just to be clear, the guide assumes mid-teens kind of clinical volumes in the back half versus the 20-plus in the first half, correct?

Correct. It's kind of maintained in that mid- to high teens.

Understood. And maybe one for Dr. Spetzler here. You brought up heme. Can you just remind us how big is the heme opportunity? And when you enter that market, what should reimbursement look like? Who should be the primary physician that you're targeting in the heme space?

I'll take that one. So for heme, we'll start off with the myeloid disorders. So that's where there's a current LCD from MolDX. So we'll be targeting basically all the indications covered by that existing LCD. It's the same call point that we're calling on today through our existing channel. And then there's a published rate out there for the ChromoSeq assay that you can look at on the MolDX website. So we would anticipate similar reimbursement as to that.

Doug Schenkel, Wolfe Research.

This is Colleen on for Doug. Just a question on OpEx. Are we correct in assuming that most of the R&D spend in the near to midterm will be on the dry lab, more computational based that should stabilize R&D spend in dollar terms? And are you doing any big studies to support the pipeline that we should be aware of? One thing that's been coming up in recent years also on the OpEx side in Specialty Diagnostics is that you really need brand recognition and accordingly need to spend on your sales force to grow. Can you potentially dial back on R&D and G&A to support a higher level of sales and marketing spend over time?

Yes. So I can definitely take the first part, and then I'll let David Spetzler answer kind of the studies question. So Colleen, yes, so from an R&D standpoint, one of the unique things about us, and it's one of the reasons why Brian and Dr. Spelzer called out the Caris Assure assay is we've done a lot of this development already. It's one assay across the care continuum.

So that allows us to be very efficient as we kind of develop and roll out these future products. So for my expectations around -- you asked about OpEx, OpEx probably in that kind of $115 million to $120 million a quarter for the remainder of the year. There might be some variability there because, again, we're going to be strategic as we get all this growth going. But from an R&D standpoint, yes, we kind of do expect it to remain flat, again, because we've already done the investment on our assay. And then Spetz, if you want to answer that the publications and the studies.

Yes. We have some fairly large studies that we'll be reading out in the next 6 to 12 months. We've done the vast majority of the investments in those studies already. So they won't significantly contribute to increased OpEx, but you can expect some significant study results from [maximum].

I was just going to add, Colleen, you've sort of pointed to the operating leverage in our business and the sales force. And I think that's a source of leverage and strength of ours, and we've built out that channel over many, many years. And in fact, our volumes have doubled over the past few years, while the relationship management sales force team has been basically flat. So we benefited from that over the past few years. I think that will continue to be the case.

And we may fine-tune it a little bit as we add new modalities, et cetera. But the reality is it's that same team that has deep relationships into the cancer centers, the institutions and the individual oncologists. So that will, I think, serve us well, and they're looking for the next set of assays and capabilities from us through that same channel.

Sebastian Sandler, JPMorgan.

This is Rachel Vatnsdal from JPMorgan. Maybe just to dig into the blood performance there. So you guys saw a nice step-up in volumes. So can you walk us through what type of color did you really see on that blood therapy selection launch? And where are you seeing the traction?

Is it in new accounts? Or is it existing tissue customers adding a complementary blood test? And then can you give us an update on what is the attachment rate that you guys are seeing between blood versus tissue?

Yes. So Rachel, it's kind of a mix of both. So obviously, it's our existing accounts that are utilizing us for tissue and that are kind of switching over. And then it's also new accounts that we're kind of penetrating. So for us, like one of the key things we're also tracking is obviously the updated guidelines around concurrent testing as well.

So, so far for Q2, for example, like for our blood cases, about 35% of those who also had tissue done, again, in accordance with the guidelines. So we are seeing some uptick in that, especially around lung in particular. So that's kind of where we're seeing the volume coming from. I think one of the key catalysts for us going forward is, obviously, right now, our assay is not in New York state. It's not New York state approved. So that's a catalyst we're working on right now to get that submitted. Hopefully, over the next kind of 6 to 12 months, that will kind of continue to build on that. So it's existing plus kind of new accounts. It's a bit of a mix.

Great. That's helpful. And as a follow-up, regarding the pharma R&D services business, you guys saw a nice step-up there in the second quarter. So how should we think about growth within pharma R&D in the back half of the year? And then can you just spend a minute talking about what you're seeing in terms of your customer environment and how that sales funnel is looking in light of some of the policy headlines we're seeing in pharma across tariffs, MFN, IRA, things like that?

Yes. So as I said earlier, Rachel, I think it's more weighted for us, like our pipeline is more weighted for us in kind of Q4 than Q3. We do have a lot kind of working through our pipeline right now. Again, we've been generally kind of more clinically focused. That's been our history, and that's what we've been focused on.

So that's why pharma revenue and R&D revenue has been in that kind of 10% range. So I definitely think going into the second half of the year, we'll see some uptick there, especially against the first half of the year. But it will be more along the pillar of data plus kind of our CDx pillar as well is where I expect the kind of growth to come from.

Patrick Donnelly, Citi.

Maybe one on the pipeline side. Obviously, MRD, big attractive market. You guys talked a little bit about that. Can you just talk about the strategy there? Obviously, some bigger players, some first-mover advantage. How you're going to compete there? What the right way to think about time lines is? And just the commercial strategy would be helpful as we think about the pipeline here.

Sure. So our MRD offering, I think, is unique in that it is the same assay, whole exome, whole transcriptome and tissue naive. So our turnaround time is the same as our current therapy selection for liquid biopsy. And there are some important components that we're able to report out besides just MRD-positive negative. So for example, when the patient is MRD positive, we include all of the mutations that we found that could indicate what therapies are more likely to be beneficial and less likely to be beneficial.

We also include the germline component that we found. So when there are incidental germline findings, we're reporting those out and the CHIP mutations, which can have other health impacts and effects. So in terms of how we're positioning it, it's a much more comprehensive solution than anything that exists out there today. And we're not guiding on time line. There are too many factors outside of our control for that.

Understood. And then maybe one just on the commercial payer side, obviously, pretty important as we think about the ASP and revenue build going forward. It seems like great traction here post the approval. Can you just talk about how things are trending relative to your expectations? And then just how we should think about more payers coming on board over the next few quarters as we just build that ASP again, the commercial is obviously a big piece of the step-up as we think about getting into next year.

Yes, Patrick. So yes, it's been trending very positively. So we do expect -- so some of the bigger national contracts that we've signed already will start to play out now starting in the second half of the year. So like personally, I think we're like a quarter or two ahead of kind of initial expectations going into the year. So we'll get more information as we progress into the second half of the year. But I definitely think it's trending positively and kind of a little bit quicker than our initial expectations going into kind of what it should look like next year in 2026.

Subbu Nambi, Guggenheim.

Are there any changes to your interest in or strategy for early cancer detection just based on some recent changes in the market and some potential changes to USPS (inaudible)

Yes. David -- Spetz, do you want to take that one about our early detection breast and our strategy?

Yes. So our strategy is to start with early detection of breast cancer. As you may know, the performance of mammography is limited, especially in those patients with dense breasts. And so we think that there's a significant opportunity there that doesn't include the diagnostic ambiguity associated with finding a cancer where there's not a clear diagnostic pathway. And so our initial plan is to go after breast cancer. There's a significant clinical unmet need there.

And while I have you, what have the KOL reactions been to the recent GPS AI publication? That offering has already been on the market in the first eight months. The reclassification data was already included in the paper. Do you expect this to be a market share inflection or a driver?

Yes. I think we've already seen improvement with the launch of this one. And it's been on the market for quite a while now. The publication just came out more recently. So I mean, the number of cases that we found where we've changed the diagnosis is really quite significant. And those are profound events for the patients. So it definitely is something that is very significant for us.

Perfect. So don't view this as just some sudden inflection. This has been around for a while is what you're saying?

Correct, yes.

Mark Massaro, BTIG.

Congratulations on a really strong quarter out of the gates. I wanted to start with the competitive environment. Clearly, you came in and delivered volumes well in excess of our model. I'm just curious, especially on the tissue side, where you guys have a leadership position. What are you seeing in the field, I guess, in the clinics in the end markets?

How much room do you think there is left to go? I know Brian talked about 30% penetration. But I'm just curious about account by account, if you think you can continue to convert and take share in accounts over the years? Or do you see other players kind of in some of these accounts?

Yes. Mark, thanks for the question. Yes, we're very positive on this market. We think it continues to grow. Physicians continue to adopt and in particular, understand the value of breadth and depth and importance of sophisticated information and assays.

And I'd say the other very important thing is that the cancer centers, the institutions, academic and corporate are really just in the beginnings in some respects of getting organized and standing up systematic precision oncology programs designed to get all patients profiled, profiled consistently, systematically and generating the best data and the best outcomes. So this is a secular trend that has begun. It's going to carry us for a long time, and the leaders in this field are going to benefit.

So the clients in this sense, the doctors as well as the institutions need a real partner. And I think not only our technology, but also our platform, the Precision Oncology Alliance, our strategic teams that help set up these programs provide a real value add and an edge that will help us grow the market, increase the penetration of real CGP and in our case, whole exome, whole transcriptome against a field that remains relatively unpenetrated.

So I think the value proposition for the client and the patient is very real and quite important. And as a result of all of that, we're quite bullish on just the sustained case volume growth in therapy selection, including tissue.

Well, more important than that is our AI insights and the maturity of our data of whole exome, whole transcriptome allow us to provide information that no other company can provide and no other lab could provide. Even if they knew what the signature was, they couldn't provide because they don't run it. So we're turning something that may appear to you as being generic, it's proprietary and more proprietary every day.

Okay. Great. And I wanted to ask a question about capital deployment. You've raised a lot of cash, over $700 million of cash on the balance sheet. It's been relatively quiet in the precision oncology space as it relates to M&A. We've seen some licenses and partnerships. But I'm just curious if there was -- if there is any appetite for you to potentially bolt on some capabilities. I understand you have plenty to work on organically. But I'm just curious how you would assess the external landscape and priorities with capital.

Yes, Mark, we don't -- look, we're very -- we're pleased that our balance sheet and P&L, everything is in great shape. So I think that gives us strategic flexibility to invest and grow the platform. But we've been doing it organically, and we intend to continue doing it organically. And I think that served us very well. So we just don't see anything out there that would be incrementally helpful at all and have kept our attention very focused. I think it's worked on standing up the best platform with the broadest and deepest molecular information. So I don't see that changing in the near term at all.

Okay. Great. And then last one for me. You guys have done a really good job on the ASP side and on pricing as well as reimbursement. I just wanted to ask a clarifying question about the 170 million lives. I think you're referring to MI Cancer Seek CDx. And I just want to confirm that, that is the FDA-cleared 170 million lives that -- is that at the higher ASP, certainly above the $3,500 rate towards the newer Medicare rate?

Yes. So that's MI Cancer Seek, Mark.

Okay. Great. Yes. And that's at -- approaching the Medicare rate?

Yes.

Jack Meehan, Nephron Research.

I wanted to talk about Caris Assure, good progress on volume. Can you just give us your latest thinking on timing for FDA approval and kind of the importance of that, what you're thinking in terms of reimbursement?

Yes. We won't guide, Jack. Obviously, we're being very careful there, especially things that are outside our control around timing of FDA approval. But definitely, it's an opportunity for us from an ASP standpoint. Our strategy there is to pursue kind of a similar path that we did with tissue.

Obviously, with blood, what we would do is we would pursue FDA approval, then go try and get ADLT and kind of price it there. But again, we don't have that in any of our numbers for the remainder of the year. So we'll give updates as we progress there, but no expectation around time line.

Okay. And then you mentioned a few times during the call, your view, the TAM continues to expand. One of the updates that came out around ASCO was in breast cancer and this idea of running multiple tests per patient in breast cancer. I was curious what opportunity you think that might mean for your test and what you're seeing in the real world in terms of that dynamic?

Yes. I think as we start to understand how you can utilize molecular information to not only guide therapy decision, but also understand the patient's response to it, we're going to see an increase in the number of tests per patient throughout their treatment courses, which will naturally expand the number of tests per year.

I'm not showing any further questions at this time. And as such, this does conclude today's presentation. You may now disconnect, and have a wonderful day.