Personalis Inc (PSNL) 2021 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Personalis' First Quarter 2021 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your first speaker today Ms. Caroline Corner, Investor Relations. Please go ahead.

Thank you, operator. Welcome to Personalis' first quarter 2021 earnings call. Joining me on today's call are John West, President and Chief Executive Officer; and Aaron Tachibana, Chief Financial Officer. This call will include forward-looking statements, including statements regarding the markets in which we operate, including potential market sizes; trends and expectations for products, services and technology; trends and demand for our products; Personalis' expected financial performance, expenses and position in the market; and the impact of the COVID-19 pandemic on our operations and our customers' operations.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, particularly the risk factors described in our 10-Q filing for the first quarter of fiscal-year 2021 to be filed today and our 10-K for fiscal year 2020. The forward-looking statements we provide during this call, including projections for future performance, are based on our reasonable beliefs and expectations as of today. Personalis undertakes no obligation to update these statements, except as required by applicable law.

Please note that in these prepared remarks, Personalis' management will refer to the company's oncology business.

This represents a category of customers and reflects our biopharma and all other customers, excluding the VA MVP, most of whom use personnel services for applications in oncology. And when referring the population sequencing, we are referring to the VA MVP or other potential customers within this market. Our press release with our first quarter 2021 results is available on our website www.personalis.com under the Investors section and include additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5:00 PM Pacific Time today. Now I'd like to turn the call over to John for his comments on first quarter of business highlights.

Thank you, Caroline. Personalis has continued to grow. We achieved another overall revenue record during Q1 and it was our 19th consecutive quarter of growth. Our oncology business which has received orders well above revenue levels since Q3 of 2019 has increasingly seen the resulting backlog turn to revenue.

In Q1, our revenue from this business groups grew 74% over the same period of the prior year. In Q1, new orders again significantly exceeded revenue and so far in Q2, we expect that yet again. The strategy of our oncology business has been to support drug development at the leading edge of cancer biology. Health strategy is working. In our population sequencing business, we have now received all of the samples required to complete our current orders, putting us in a great position through Q3. We have also engaged with the VA MVP about options for a further order under our existing contract with them, which expires in August of this year.

We are optimistic that our relationship with the VA MVP will not only continue but broaden in part by leveraging capabilities initially developed in the oncology side of our business. Given all of this progress, we will now resume giving full year guidance reflecting our improved visibility. Our mission is to help cancer patients live better and longer lives and we developed our ImmunoID NeXT platform with this objective in mind.

The NeXT platform provides our pharmaceutical customers with the capability to better understand cancer patients genetic profile, which can help with drug development, therapy selection and ongoing monitoring of the tumor to help detect recurrence. We believe that in order to better understand the cancer patients tumor, both tissue and liquid biopsies together can provide the most comprehensive view, leading to the optimal therapy and treatment decisions being made.

Both our tissue and liquid biopsy-based offerings have been designed specifically to meet the needs of our pharmaceutical customers and provide data on all of the approximately 20,000 human genes. We expect our oncology revenue to become a larger part of our total mix in the future as we leverage our ability to analyze both tissue and liquid biopsy samples with these platforms. Tissue samples give us access to RNA and to the immune cells, which have infiltrated patients tumor. Also by analyzing liquid biopsy samples, we're able to provide information about a patient's tumor across multiple time points. Used together, we believe our oncology platforms provide our customers with the most comprehensive analysis of tumor burden and biomarker identification available today. We continue to execute well to our strategy. And later this year, we plan to expand our liquid biopsy offering with the launch of NeXT personal, our minimal residual disease or MRD offering that will be designed to track changes in a specific patient's tumor. We had begun the process customer provided samples to ensure our product development meets customer requirements and are very encouraged by those initial results. We believe that with the ability to monitor over a 1,000 mutations, NeXT Personal will compare favorably in terms of sensitivity and information content with panels from competitors that contract can identify and track only dozens or hundreds of mutations. We also believe that NeXT Personal will be applicable to both pharmaceutical research and clinical diagnostic markets in the future. Now I would like to provide 6 recent highlights and accomplishments from Q1. First, we continue to make encouraging progress with our exome scale NeXT liquid biopsy product. As you recall, we launched this product in August 2020 and have received orders from several customers.

We have now delivered our first customer order. And based on that data, the customers already asking us to process additional samples. We have our first publication authored jointly with one of our customers, showing the utility of our NeXT liquid biopsy together with our ImmunoID NeXT analysis of tissue from the same patients. We also presented posters showcasing the state of the art results using NeXT liquid biopsy at the recent AACR conference. We believe that NeXT Liquid Biopsy will also work synergistically with NeXT Personal when it is released and that liquid biopsy based products will contribute increasingly to revenue as we enter 2022. Second, we announced a collaboration with Natera to provide front end tissue sequencing services based on our advanced NeXT Exome. To help them identify variance, they will use to design their signature of personalized liquid biopsy test. Additionally, Personalis provides expert tumor tissue sequencing services to multiple Liquid Biopsy companies, leveraging our deep know-how in the processing of Formalin Fixed Paraffin Embedded or FFPE tissue for many different cancer types. We expect our long-term growth to be based on our own products, including our own liquid biopsy products. But these partnerships showed how Personalis has completely respected as a technological leader in our field and they supplement our revenue as we build our business.

Third, we announced a collaboration with MapKure, LLC. The company jointly owned by Beijing Limited and SpringWorks Therapeutics Incorporated. We plan to use our next platform for their clinical trials and companion diagnostic development. We believe our work with companies such as MapKure is a strong testament to our technology and capabilities.

It will also allow us to showcase our genomic profiling platform within a clinical setting, which we expect to assist us with future regulatory approvals for our next platform of products and services. For us, our customer base has broadened substantially over the last year. We have now received orders from a majority of the top 10 oncology focused pharmaceutical companies.

Since we introduced the NeXT platform in 2019, as of the end of Q1, we have received NeXT orders from 50 different customers. In Q1, we added another large global pharmaceutical company as a customer, starting with an order of almost $1 million. We believe this growing adoption of NeXT further highlights the power of our platform and the comprehensiveness is important to our customers.

Fifth, over the past few quarters, we highlighted some of our initial plans to establish a lab and commercial operations in the People's Republic of China and to partner with Berry Genomics. Our team continues building our laboratory in Shanghai and we are hiring additional employees. Customer engagement is very good.

For a pharmaceutical company to include Personal sales also biopsy samples from clinical trial patients in China, they need to apply to the Chinese regulatory authority HGRAC for permission. We are supporting preparation of a number of these applications and anticipate that HGRAC decisions could be received as early as Q3 this year.

In a number of these cases, these are international clinical trials for which Personalis has already received multimillion dollar orders to process samples using our NeXT platform from the portions of the trial outside China. We're also in discussions with a number of Chinese pharmaceutical companies of their potential use of our NeXT platform in their clinical trials in China.

We continue to expect that our operations in China will begin in 2021 with moderate revenues and begin ramping in 2022. While this project will take some time to meaningfully contribute to our top line, we believe this is an important investment. We look forward to updating you on our progress. Sixth and finally, in addition to the achievements just mentioned, we also recently announced the addition of Dr. Woody Myers to our Board of Directors.

Dr. Myers has extensive health care industry experience and most recently served as the Chief Medical Officer and Chief Health Care Strategist at Blue Cross and Blue Shield of Arizona. In addition, he has been active in government having served as physician help advisor to the United States Senate, Canadian Labor and Human Resources as Health Commissioner for his home state of Indiana and as Commissioner of Health for the City of New York.

Dr. Myers received his MD degree from Harvard and subsequently his MBA from Stanford. Dr. Myers will be instrumental in helping Personalis grow and scale in the future. I'd now like to update you on the population sequencing part of our business, which is sometimes referred to in the field as population genomics.

We continue to build a funnel our commercial opportunities and we are early discussions with several of these prospects. Initial discussions are going well and are encouraging. We expect that we will have additional customers and revenue from these new commercial opportunities in 2022.

Our work with the VA MVP program represents the largest population sequencing effort within the United States. The VA now targets enrollment of 2 million veterans and over 825,000 veterans have enrolled so far. Personalis has been contracted so far to sequence over 146,000 VA MVP samples with approximately 29,000 currently remaining to be sequence.

We have been the sole provider for the VA MVP's whole-genome sequencing project over the last 8 plus years and have been awarded multiple contracts by the VA MVP during this time. Our existing contract with the VA MVP ends in August 2021. However, the VA MVP in place additional orders with Personalis under our existing contract and we are now in active discussions with the VA about that.

On our last earnings call, we were cautious due to the ongoing pandemic. But as we've had more discussions with the VA MVP, we have become quite optimistic that we will receive an order between now and the end of the summer. We are also encouraged by the long-term prospects for VA MVP. In early April, the White House released their fiscal year 2022 top-level budget proposal, which we believe is a positive sign relative to continued funding for the VA MVP. The White House noted that their request includes $882 million for VA R&D and refer to it as "the largest year-over-year increase in recent history." In headlines that this proposed budget "invest in research critical to Veterans Health needs." Their proposal represents a 12% increase in funding specifically for VA Research. In December, we announced we had become the first for-profit company to sequence more than 100,000 whole human genomes in the United States, which was an important milestone for us. We expect that total to grow to more than 150,000 whole human genomes by the end of 2021. Some will be for population sequencing and others will be cancer genomes. We expect our unparalleled experience and scale with the VA MVP position us well for new population sequencing opportunities. Given our clinical experience and work with pharma, we also see future opportunities to help transition population research to population health and to involve pharma in the future.

I would now like to expand on the synergy between the Population Sequencing and Oncology parts of our business. In particular those that go beyond the more obvious operational and cost synergies. Our extensive experience with whole-genome sequencing combined with our deep expertise in cancer has allowed us to launch whole-genome sequencing from cancer samples. We believe that this will be increasingly important in the future, particularly in cancers such as breast and prostate, which have relatively low mutational burdens. Using our cancer whole-genome technology can identify up to 20 times more somatic variants to serve as the basis for personalized cancer assays. We believe this will let us achieve high sensitivity even in cancers which have low mutational rates, which have been surgically resected or which shed relatively low amounts of cell-free DNA into the blood. We believe this can be a leading technology and some very large market opportunities and we'll have more to say about this as these product developments progress.

In summary, I'm very proud. We have continue to show strong growth, particularly in our oncology business. Customer interest and adoption of NeXT has been excellent and our pipeline of compelling new products is rich. We have the capital require to invest in our growth initiatives, such as new products like NeXT Personal, enhancing our clinical and regulatory capabilities, expanding collaborations that further highlight the utility of our NeXT platform, expanding our operations in foreign locations and expanding capacity to support our revenue growth. We believe this puts us in a strong position for near and long-term growth. With that, I will now hand it over to Aaron for our financial results.

Thank you, John and good afternoon everyone. We had another great quarter and achieved a new record revenue level once again from our focus and strong execution. During my prepared remarks, I will provide details about our financial results for the first quarter of 2021 and our guidance for the second quarter and the full year. Total revenues for the first quarter of 2021 were $20.9 million, up 3% from $20.2 million for the prior quarter and up 9% from $19.2 million for the same period of the prior year. The $20.9 million was a new record high for quarterly revenues and the growth was primarily driven by an increase in genomic testing services provided to biopharma customers. Aside from the VA MVP biopharma and all other customers accounted for revenues of $7.7 million in the first quarter, representing a 74% increase over the same period of the prior year. This was our second consecutive quarter with the year-over-year increase of more than 70% which highlights a couple of key points. First, customer orders that we have won over the past year and a half are converting to revenue. In the first quarter, revenues from our NeXT platform exceeded $4 million, which is the highest quarterly level achieved thus far. Second, new order amounts continue to keep revenue reported each quarter, which provides confidence that our biopharma revenue will continue to grow into the future. Our current biopharma revenue is mostly from tissue samples as we ramp our liquid biopsy offerings in the future, this should help accelerate growth due to multiple timepoints or another words, the number of tests per patients. For the first quarter. The VA MVP revenue of $13.2 million was higher by 5% from last quarter and was 10% lower compared with $14.8 million for the same period of the prior year. If you recall, we do not have specific testing turnaround times for the VA MVP. Therefore, we have the ability to modulate volume up or down to compliment the biopharma sample testing volume which can have some variability from time to time. The VA MVP unfulfilled orders were $30.3 million at the end of the first quarter. And based upon current estimates, we expect the unfulfilled orders to convert to revenue over approximately the next 2 quarters. Gross margin was 35.6% for the first quarter compared to 30.1% for the prior quarter and 21.1% for the same period of the prior year. The sequential increase of 5.5 percentage points was primarily due to sample processing efficiencies and a slight reduction in expenses. The year-over-year increase of 14.5 percentage points was primarily due to customer mix, operating leverage from the 74% increase in biopharma volume and lab efficiency improvement. We typically do not provide gross margin detail by customer type. However, it's important to note that the VA MVP gross margins continue to be solid due to the high volume and a single service offering, which has been automated and has a very efficient sample testing process.

Over the next couple of years, there could be some gross margin variability due to headwinds from investments in new capabilities, capacity, expansion for China and others. Longer term, we expect our gross margins to increase as we achieve scale. Operating expenses were $19.9 million in the first quarter compared to $13.7 million for the same period of the prior year. R&D expense was $9.5 million in the first quarter compared with $6.4 million for the same period last year. And SG&A expense was $10.4 million in the first quarter compared with $7.3 million for the same period last year. The increase in R&D expense was for new product development and the increase in SG&A was due to commercial expansion, public company costs and continuing to enhance our infrastructure. Net loss for the first quarter was $12.4 million compared with a net loss of $9.1 million for the same period of the prior year. The net loss per share for the first quarter was $0.29 cents and the weighted average basic and diluted share count was 42.3 million compared with a net loss per share of $0.29 and the weighted average basic and diluted share count of 31.3 million in the same period of the prior year. Now onto the balance sheet. We exited the first quarter with a strong balance sheet with cash and short-term investments of $353.4 million. In the first quarter, we used $11.7 million of cash from operations due to the net loss and working capital needs. Capital equipment expenditures were minimal and we paid $0.4 million. And as mentioned during our last conference call, we expect our cash usage to increase from the mid-$40 million range in 2020 up to a level between 80 and $90 million in 2021 due to investing in the many growth initiatives in front of us. Now I'd like to turn to guidance. Our business has performed really well through the pandemic and customer orders for the NeXT platform has been robust over the last year and a half or so. This gives us more confidence about the outlook for both the second quarter and the rest of 2021. And with this in mind, for the second quarter of 2021, we expect total company revenues to be approximately $21.3 million and we expect biopharma and all other customer revenues excluding the VA MVP to be in the range of $7.3 million to $7.7 million, representing a year-over-year growth rate of 54% to 62%.

Net loss is expected to be in the range of $16 million to $17 million and the weighted average basic and diluted share count is expected to be approximately 43 million. For the full year of 2021, We expect total company revenues to be approximately $85 million. And we expect biopharma and all other customer revenues excluding the VA MVP to be in the range of $30 million to $32 million, representing an annual growth rate of 33% to 42%. Net loss is expected to be in the range of $70 million to $75 million due to increase in expenses and the weighted average basic and diluted share count is expected to be approximately 44 million. We plan to provide an update to this information during our next earnings call. Now I will turn the call back over to the operator to begin the Q&A session. Operator?

(Operator Instructions) Your first question comes from the line of Tejas Savant from Morgan Stanley.

This is [Yuko] on for Tejas. How are you thinking about positioning the MRD offering in light of the multiple players on coming onto the market? And as a follow-up, what are your views on tumor informed versus tumor agnostic approach for MRD?

I'd be happy to answer that. Yes. So Personalis expected to have the highest performance MRD offering available in the market. As I mentioned, we expect to be in a position to monitor over 1,000 genetic variants and this gives us enormously more sensitivity. Most of the other products on the market look at a much, much smaller numbers of genetic variants and that directly limits the sensitivity that they would have. So we expect to be most sensitive. And also because of this rich content, we expect to be the most informative, not only about quantitative senses of the tumor or detection of the tumor, but also some characterization of how the tumor is changing over time. So I think that gives you an idea of the relative positioning of the product. And then, in terms of tumor informed versus tumor agnostic, if we look at a tumor agnostic approach, it means that you don't use any information about where the genetic variants are located. So when you sequence the DNA from the plasma, generally, in a tumor, let's say something like breast cancer, you had only have one mutation out of every million basis across the genome. And since the sequence rates are only a few hundred basis long, it means that something like 99.9% of the sequence reads don't have any useful information, they don't cash variant. And so it's an enormously inefficient approach, and actually not very sensitive. As a result, our approach has been want to wholeheartedly adopt the tumor informed approach.

We think it's the only way to achieve the kind of sensitivity that we're targeting and the performance that we've seen on the customer provided samples that we've already been working with is fantastic. So we'll have more to say about that as the product comes out. But I don't think there's any question that the tumor informed approach is the hands down performance there.

And then, how are you thinking about entering the clinical market down the road?

Yes. So this is an important next step for Personalis. We anticipate doing that probably in the next few years here. We've been building our business based on pharmaceutical companies to start with. And these are often very advanced customers and there is no issues with reimbursement. So we've been able to achieve strong relative financial performance based on that. Going forward, our view is that the diagnostics that are available today are not sufficiently informative and that the patients will do better if they can have not only richer inflammation, but just more sensitive information. There's a lot of information. There are tumors where we can tell that the tumor eventually comes back and is eventually detected by a genetic test in the plasma. But sometimes a year or 2 can go by with the cancer not being detected. And since we see that the cancer is the same, cancer as well as existed before surgery, because you can see the genetic fingerprint. The fact that it was not detected at all those intervening time points, means that the test just weren't insensitive enough. And we've been able to look at the data from tests like that and extrapolate back in time. And we can see the kind of sensitivity that would be required to detect most of those cancers at much, much earlier time points than is currently being done and that's what we're developing in our NeXT Personal products. So the ability to look at a 1,000 or more genetic variants, we think will be transformative and there's something that we'll be made at. Obviously, there's more advanced testing generally would be the kind of thing that you might start with at high-end cancer medical centers and so that would be a reasonable starting place for us.

We have been working on FDA approval for our NeXT platform. We think that FDA approvals also important for the diagnostic market. So perhaps, those are some of the steps and we'll have more to say about that as we make progress towards the clinical market, but it is a major opportunity for us.

Your next question comes from the line of Doug Schenkel from Cowen.

So I guess on NeXT Personal. I'm just wondering, just to start there, if you could share, what we should be looking for in terms of upcoming R&D and commercial stage gates or milestones for that product line?

Yes. So as I mentioned, we're now at a point where we're able to start testing customer provided samples. We have a number of customers that we've worked with over the years on a variety of advanced topics. Some of them are very, very interested in seeing what they can see with NeXT Personal, because the kind of performance we're talking about is so differentiated.

So I think what you'll see is that we'll come to a formal launch of the product. We've said we'll do that in 2021. I would expect by the time we've done that. We will actually have rather than a substantial number of samples both from customers and collaborators and it will be off and running with that. We do see interestingly a -- as I mentioned in the prepared remarks, a lot of potential synergy between NeXT Personal and NeXT Liquid Biopsy, because let's imagine you have a patient that has been the tumor surgically resected. So we can use our NeXT platform on that tissue to identify the genetic variants. We can then use NeXT Personal to see if it's numerous coming back. And if it is coming back, it might be at extremely low levels. But we can then watch it, if it in fact progresses and grows. Once it gets up to a certain level, we're in fact you'd be able to detect it with the exome scale test. Then, you can bring in the exome scale liquid biopsy and have a much more comprehensive view of what's going on. And in the interim, between the time when the tumor was surgical respective and the time when it comes back, you can anticipate that there may have been a lot of new mutations, that may be how it's advancing or if it's may be because of a drug treatment, it may be a scaping of the drug. And so just tracking the mutations that were in the tumor back at the time of surgical resection, you'll be missing a lot of the variants. But by looking with the NeXT liquid biopsy the whole exome level, it gives you the ability to see new mutations that have happened wherever they have happened in the exome and to be able to detect those. So we see those 3 products, Our NeXT platform from tissue and our NeXT personal and NeXT liquid biopsy, all working together to provide a comprehensive view of the patient's tumor as it's evolving over time.

And kind of using that segue from Personal to liquid. It's nice to hear that you delivered your first customer order to next for NeXT liquid biopsy. What do you expect the ramp to look like from here? And then, are the initial used cases likely on retrospective samples or is there -- do you think that there is going to be early use in prospective samples as well?

So it's a good question. The early work as we've said from the beginning, this is kind of a new category, nobody else is really have a commercial whole exome scale liquid biopsy up to this point. And so people are having to figure out what's the best use for that, how well does it work and so forth. So we expect that in 2021, a lot of that activity will be pilots. We have a bunch of those kinds of orders now. We're continuing to process samples for customers and people are beginning to look at it. I would say the initial comment from we made from the first customer who got the first results back was already. Well, we want to do more of this. And some of them a lot of times they are in situations, where people are trying to make decisions fairly quickly. So the fact that we can sometimes turn these things around reasonably quickly is helpful. So I'd say, I would expect that some of the samples will be prospective. And going forward as I can describe it how this might be involved in the treatment of the patients, I would expect that it could be prospective. On the other hand, a lot of our customers and pharma have been collecting liquid biopsy samples for an extended period of time. And so they have those banks and so that leads to the retrospective use. And because we have so much of our oncology business in the pharmaceutical space I would expect that a fair amount of our NeXT Liquid Biopsy business in the early period of time will be retrospective with pharmaceutical companies.

Your AACR, there was a poster from Personalis specific to NeXT Liquid Biopsy and Pan cancer shutting patterns for CT DNA for cancers with different genetic backgrounds and tissue of origin.

In terms of just digging a little bit deeper on that data. I'm wondering if you'd be willing to talk a little bit more about what we might expect moving forward? I'm especially interested in commentary about the heterogeneity. As I'm sure you appreciate this has implications for tumor agnostic versus tumor informed liquid biopsies.

And then, secondly, I'm interested in the utility of whole exome. In other words, have you seen anything in terms of how many actionable insights are you identifying that are being missed by pre-defined panels?

One of the collaborators we've worked with it's a high-end medical center, they haven't released their data yet. So we can't describe it in too much detail. But they were doing work in a certain kind of cancer. And what we were able to show using NeXT liquid biopsy was that they identified variants for the period to be fairly significant in terms of the progression of these tumors. And it turns out, these were in genes that just aren't in the conventional small panels obviously by having an exome we have all the genes. But if you look across the conventional diagnostic tests, they tend to be much more limited sets of genes. Ad they just don't include the genes that are involved. Basically too more escape, a lot of times that I think people design these panels and they're really designed to capture the genetic variants, that may have caused the cancer in the first place. But tumor escape from therapy can happen in other genes that aren't necessarily in those categories and therefore aren't on those panels. So I think this is an example of why it's helpful to the sort of future-proofing that happens by having all the genes is that we're not pre-supposing which change you should look at, we just look at them all.

Your next question comes from the line of Patrick Donnelly from Citi.

This is Jesse on for Patrick. Apologies if I missed this. But can you just remind us on the timing for the new China lab and just what if any revenues you factored in for the guidance in 2021? And then you just mentioned in your conversations with some of your existing customers that you've been working with clinical trials in other geographies. So just curious if you have a sense around what proportion of the market this new lab will open up within your existing customer base?

Yes. Maybe I'll let Aaron start off on that. He has been very involved in our China operation.

Yes. So in terms of the China lab, 2021 is going to be the year, where we develop it, build it out. And we're almost ready to go right now in terms of begin testing. We've got equipment showing up. The facilities been completed. We've hired our first few employees. Unfortunately, we haven't been able to travel back and forth due to the pandemic and restrictions on both sides. But we're going to go through development of training over the next couple of months. And then, we expect the lab to be able to process samples this year on a test or pilot basis. And from a revenue standpoint, we don't have much revenue built into the guidance this year from China. This is really going to be a build out year. So the revenue opportunity is really in 2022 and beyond. In terms of percentage of the market that this opens up, it's going to open up an extremely large market not only in China but outside of China. We have a lot of our global pharmaceutical partners who actually are thrilled we're setting up in China and we're going to have access to even more samples outside of China because of this capability as they want to run global clinical trials. Thank I guess I had support that. I think one of the comments earlier on was that we have cases where we're working with large pharmaceutical company. And they're going to the Chinese regulatory authorities to get permission to run the test like ours on samples inside China. But because we've been supporting them and saying great if we get the regulatory position we'll be -- we're building up a lab and we'll do those things for you in China. It's already helped us close orders were just a single order can be in the multi-million dollar category for the portion of the clinical trial, which is outside of China. Many large international pharmaceutical companies are running trials that are recruiting patients in many, many countries around the world simultaneously.

And so we can process the samples from patients in all the non-China countries out of our California lab and then process the ones from China in our Shanghai lab once we have permission for that. So I think part of what we'll see is there will be the revenue that gets reported eventually as being revenue from China will only be the revenue that's actually where the samples are sequenced in China. But actually we expect a much more significant boost to be coming from all of the non-China revenue we have, that was sort of the portions of those clinical trials that were being running in all the other countries. So we see this is have a truly international effort. And having the China lab, gives us access to those trials and to do the non-China parts as well.

And then, just can you provide an update on the pop-sea pipeline outside of the VA MVP. I think you mentioned you expect to start having new relationships in 2022. So just curious what the time line looks like for when you'll be bidding on those and when we could hear about some actual award decisions?

Yes. So Personalis has -- we brought in on board Lead for the Business Development side of our activity I'm going to say in September of last year, highly experienced individual and he used to work at Genomics Medicine, Irelands with a big population sequencing effort there but knowledgeable about population sequencing projects all over the world. We can leveraging his contacts and others to then engaged with groups and I'd say it's been remarkable the interest there. A lot of times, these projects have been done prior to this by academic groups inside of the countries and that really set up to do production scale sequencing to bring pharma into the mix. And a lot of these countries want is something where this actually has a clinical component to it as well. So the people who are being sequence and benefit from the data from their own genomes and so that's a component that we're bringing into this as well. So I think there is now we do see a fair amount of interest on this. These are large government programs. So the decision process can be a fairly lengthy. But I think we said that originally we would expect to see the first additional orders on that in 2022 with first revenue also in '22. I think that's looks like that's about on track. It's always hard to know what these things exactly the timing. But we had a review of some of those earlier this week. And there are multiple countries, where they're possibly getting, I wouldn't say it's boiling out, but things are definitely summering in and getting to be pretty interesting. So I think we just have to build patient to get to a point where there is a contract we announced, but I think we're definitely on a good track here.

Your next question comes from the line of Mark Massaro from BTIG.

So if you could just provide an update on how the Natera partnership is progressing, what milestones we should be looking for there? And if I could just add a follow-up. In the past you had talked about biopharma becoming a larger portion of revenue mix. Looking forward, so just wanted to check in and see if that how play?

So, this is John. I'd be happy to answer those. So yes, I'd say the relationship with Natera has been great. They have been really trying to move forward on this. I think the -- anything that would have implications in terms of their revenue is I think something that they need to disclose. So we won't be disclosing things to do and their revenue. On the other hand, it is a very active program and this is a clinical program. There's a component where I think they've disclosed they worked both of pharmaceutical companies. But they also see a significant market that they can address quite early and with a lab developed test and on the clinical diagnostics side. And we anticipate being able to support both of those and it's a good, early entry for us. And their products is very different from what we're doing with our NeXT Personal. So we -- there's kind of 2 different positions in the market and I think Personalis' will benefit from both of them. So I'd say, we're pretty as a lot of effort going on in that area at this point and we're pretty excited about it. I think on the on the biopharma side, the, you know that we have the 2 different parts of our business. The population sequencing side and they the oncology side and in the past they've been viewed as being quite different they but financial reporting purposes. They ended up being broken out. I would say we see over time that these will, these are both likely to converge and there'll be more and more blurring of the lines between them. As I mentioned in some of the population sequencing groups that we're talking to, now they're pretty interested in the evolving of pharma, we've been talking with a number of pharma companies to actually are quite interested in being involved in population sequencing efforts that we're, we're bringing the market. So this is an example of something where there is clearly overlap population sequencing in the past was really mostly about whole-genome sequencing of vehicles germline genomes from blood. But as these become more clinically oriented there's cancers obviously can be a major component of these. And so the advantage the Personalis brings is we have the largest experience of anyone in the world commercially sequencing 100,000 or more whole human genomes but then, but then also having process huge numbers of cancer samples and having the clinical potential there as well. So the fact that we can sort of put that altogether for a country and engaged with pharmaceutical companies who may be interested in both the data but also helping to finance some of these efforts. I think these are things where we see that the 2 businesses overlapping more and more. So as we at this point, let's say you can see the kind of growth that we've had recently the oncology side of our business has been growing more rapidly than the population sequencing side. I think we think both sides of the business are going to grow over time. If you look, 10 years out and said, which is larger? I think the oncology business is likely to be the big business. But population sequencing, meanwhile will have probably taken on more and more elements of oncology and more and more diagnostic elements. So the 2 businesses are likely to increasingly overlap as opposed to being kind of separate almost competing businesses.

So just an unrelated follow-up. Are you able to provide an estimate on the likelihood of the VA contract visibility for getting a task order. And if you could touch on like some of the competitive factors that going through that?

Sure. Yes. This is John. We've been talking with the VA about this. Actually, we have an existing contract with the VA. It's been going on for a number of years. The VA has been able to issue additional pass orders which they've done multiple times over the years. And I would say that -- our current indication is that the step up that they're likely to take is an additional task order.

We expect that that would probably happen between now and the end of August at some point. We've been having multiple discussions about exactly what that could contain. But we expect it to be in largely a continuation of the kinds of work we're doing and perhaps expanding into some new interesting areas because this is an extension on an existing contract where we have, there is no competitive aspect to it, there is we just expansion and more money being put towards the project.

We've been the only whole-genome sequencing provider to the Million Veterans Program since 2012. So it's a long-term relationship. And we've done a lot of things to try to be the best possible partner for the VA. And I think it's just been a great relationship there, we really admire what they're doing and we've been able to bring some of our skills to help them.

Your next question comes from the line of Mike Matson from Needham and Company.

Guess I wanted to start with gross margin, so obviously volume should help there but I just wanted to get an update on what you're doing aside from just seeing the volumes grow to improve your gross margins.

In terms of gross margin. So we had a great quarter here in Q1. The gross margins are highly dependent upon volume, volume is important. And so you can see with more than $7.5 million of biopharma revenue, our margins did scale accordingly. And in terms of the path forward with highly automated the VA MVP testing process, we're going to be doing the same thing with biopharma today, it's a little more manual, so we do require more labor per sample process than we do on the BA MVP side and so that's another level, we're going to be able to play with as we go forward to improve margins and when you look at scale, our objectives are to get to scale from a top line standpoint. And at that point in time, you're going to see Personalis with margins equivalent to other peers in this industry.

Okay. And then I just wanted to go back to the Natera partnership. So are you, it sounds like you're planning to continue to offer your services to sequence other companies tissue samples to support their liquid biopsies even after you launch your own. I mean just what are your thoughts on that. It's, we do not view it as competing with your own product own tests or is it just the market is just so large, that it's just not really kind of cannibalize your test at this point?

I don't see that as a problem. I think it's, I think it's a very large market and the products that the companies tend to be quite different from ours, there are companies taking a variety of different strategies people on this call, we've talked about tumor informed versus tumor agnostic and things like that. So we work with companies on both sides of that divide. And we were interested in supporting the growth of this whole area and we think, I was wondering if you made off of that in the long term, I think the main revenue growth driver for Personalis will be our own products. I think that will be true of any company.

But actually, there's a lot of other good companies in the market that are doing other kinds of work that doesn't really duplicate what we're doing. And so we're happy to work with them and it can be part of the overall mix but didn't to make no mistake, our role is not to be just a kind of a supporting actor here. We expect Personalis to be one of the largest companies in this space over time and we think we have the technology and IP to make that happen. So I think it'll be. These are definitely helpful relationships for us along the way. But a few model where we get to 5 to ten years out, it's almost all going to be based on the products, the of the Personalis.

And then just as far as the population sequencing goes. It sounds like you are in discussions with some other potential customers there. But I was just wondering if you could maybe talk about the types of groups that are interested in population sequencing. I mean it seems like it's mostly it would mostly be governmental groups. But I mean, are there other private industry groups or organizations or anything that are looking at doing this and then is it, is it limited to the U.S. or is it really a global thing where you could do work for maybe other governments or things like that.

Yes, I'd say the majority of the other programs we're talking with are outside the United States there are population sequencing initiatives and probably 70 rated countries in the world. So and we've been talking with quite a few of those folks. So we're talking to people all over the world on that and that could include so in some cases 1 is where they want to get started by sending samples to California we're set up and so they can do it at scale quickly and efficiently today that way but we know that a lot of these groups want to have build-out of the economic advantage of this locally and so we've taken the experience that we've been getting by setting up our own lab in Shanghai, China and that certainly opens up idea is that if we needed to have labs in other countries as well. Once you've done one at a distance like that with all the barriers and differences that there are between the U.S. and China, it could certainly do that between the U.S. and many other countries.

In terms of you talked about institution types. So certainly some of these are initiatives. I'd say many of these are initiatives that they were may be initiated by governmental groups just as the Genome England project was which was one of the first in this category. Now the other hand, we do see it as we've talked with pharmaceutical companies about this we have a pretty serious interest in this kind of data as well and it's really synergistic because for a lot of the countries, they would like to have clinical trials run in their countries sooner rather than later, because it means some of the cancer patients they have excess potentially to these potentially life-saving give a state of the art drugs. It's also a good for them, economically and if patients from their country are part of the clinical trial.

Then the genetics, they're not, you're not ending up with drug is being approved only based on occasion in genetics from people of European descent but you agree, I would like to have pharmaceutical development be attuned to the genetics of people from all over the world and pharma one side as well. There's a huge market that's outside of U.S. and Europe, and so that is people who have a lot of diverse genetics and those can be real opportunities from a drug development standpoint as well. So and I think involving these other countries in involving pharma. I think I imagine a different mix of in the past. This was really just governmental research. But I think looking forward, it's hard to imagine that the institutional mix doesn't start to include a significant pharma component and that can be a real win-win. I had one more comment. Then you had an earlier question about gross margins, I think Aaron really cover that in a way. But one of the other elements, it's happening here is that sequencing technology continues to improve. And although in principle, you could say, well that could benefit everybody who is making these diagnostics, but it's not actually quite true Personalis has developed much larger, much more advanced diagnostic testing with we use enormous amounts of sequencing. If you look at some of the cancer panels that are main stream on the market today, we read their FDA filings, you'll see that they use maybe 1 billion basis at a time for patients. And 1 billion it sounds like a lot, but actually these days it's a pretty small number. We're running tests where we've been sequencing up to a trillion bases per sample and so you don't hugely more. And so if somebody is only sequencing a billion basis at a time and Illumina state of the art sequencers today already can handle 6 trillion bases every time you need run them. It's hard to leverage more because you just don't have that many samples at one time whereas because Personalis have been much more expansive. In terms of the advanced biology, we've been looking at many of our tests involved hundreds of billions of basis of sequencing. And so these new platforms will help us disproportionately. And so when we see alumina for example has talked about $100 genome of work associated with some of their other activities, they've talked about guaranteeing 43% reduction in prices by the year 2025 and things like that. Personalis is one of the company's most likely to benefit from that, because as the cost of sequencing comes down, we're using so much sequencing. That the reduction in the cost of sequencing will help us disproportionately. We estimate that last year, about 4% of all DNA sequence in the world was sequenced by Personalis.

So we're getting to be one of the larger laboratories in the world and we absolutely look forward to the $100 genome technologies and will be the first to sign up for them as soon as they're available.

(Operator Instructions) Your next question comes from the line of Swayampakula from H.C. Wainwright.

This is RK from HC Wainwright. Most of my questions have been asked. But I just want to understand a little bit about the MapKure relationship that you have, where you're trying to help out not only in the clinical trials, but also for the clinical diagnostic, I mean the companion diagnostics that they are trying to develop. So is this one, is this post of the many that you are looking at in the sense for, if one thinks about revenues as tenants in having a companion having to work with the companion diagnostic can be really helpful as long as the life of the drug is in the market. So how do you supposed this relationship would act as an example to invite additional players to do similar collaboration with you?

Yes, that's a great question. So as we do see companion diagnostic development is an important part of what we're doing. We think that the kinds of technologies that have been used for companion diagnostics up to this point has been very simple. We see a lot of real-time PCR and very like single biomarker kinds of tests. Andso the ability to move beyond that to more sophisticated biomarkers is really what a lot of our NeXT platform has been in that. And so the MapKure effort is one, typically a new drug and a clinical trial we have to go through Phase 1 and if that's successful then Phase 2 and then if that's successful Phase 3 and so forth. So that it can be an extended period of time. But we would expect to work with them on that and they can begin using the platform we have now and then as we're taking our platform through the FDA anyways. This would be something that where there would be, need to be a parallel effort with them as they make progress through trials and obviously it's gated by whether the trials are successful, but assuming that the drug continues to be successful and they go on one, one phase after another. Then the scale of that effort can increase that can help us certainly financially. And yes, we absolutely are talking with other pharmaceutical companies also about this kind of companion diagnostic development. I think people have been interested to say that something that's it considered quite sophisticated have a whole exome and transcriptome being used at a companion diagnostic scale biopharma. But actually, when we talk with the FDA, I think the people we spoke with, they're very advanced scientifically. They completely understand why that makes sense. And obviously, we have to do our homework to get to an FDA approval. But I'd say, the people involved same upbeat and optimistic and to team, let' make it happen. So we have an increasingly large team working towards the FDA single site PMA, that we're filing for and I think it's going to be as important driver for the future of our business.

And there are no further questions over the phone line at this time. This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you all.

Thanks. Buh-bye.