Veracyte Inc (VCYT) 2013 Q3 法說會逐字稿

Good afternoon and thank you for joining us for our first earnings conference call as a publicly traded company. Joining me today are Bonnie Anderson, President and Chief Executive Officer and Chris Hall, Chief Commercial Officer.

Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical including those about our future financial and operating results; our plans and prospects; our intended uses of proceeds from our IPO; the success of our business strategy; attributes, benefits and value of our tests to patients, physicians, and payers; growth opportunities and the size of potential markets; future products, product launches, and our product pipeline; international expansion plans; demand for our test and drivers of demand; payer coverage and progress in reimbursement and patient access; clinical outcomes and timing of clinical studies and product launches; and our expectations regarding our ability to comply with potential regulations constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities and Legations Reform Act. We refer you to our prospectus dated October 29, 2013, filed with the SEC and, in particular, to the section entitled risk factors for additional information on factors that could cause actual results to differ materially from our current expectations.

These forward-looking statements speak only as of the date of this call. And we disclaim any obligation to update these forward-looking statements.

Our earnings press release for the period ending September 30, 2013 is available on the investor relations page of our website at www.veracyte.com. I will now turn the call over to Bonnie.

Thank you, Shelly. Good afternoon, everyone, and thank you for joining us today.

Before commenting on our business progress and highlights for the third quarter, I'd like to begin by welcoming all of our new shareholders to the Veracyte family. On behalf of our management team and the entire employee base, we truly appreciate the vote of confidence that you have provided becoming a Veracyte shareholder.

With your investment, we can now advance our business, impact the lives of many more patients with Afirma, and bring new products to market that we believe will have a positive outcome for patients and a savings to the healthcare system. If we have not yet had a chance to meet you face to face, we certainly look forward to that opportunity.

Now I will begin with a review of our business including recent highlights and progress for the third quarter. Shelly will then review our financial results and after that we will open the call up for questions.

Since this is our first earnings call and some of you may be new to our story, I'd like to start with a brief overview of the Company, our strategy, and our market opportunity. At Veracyte, we're focused on pioneering the field of molecular cytology to improve patient outcomes and lower healthcare costs.

We specifically target diseases that often require invasive procedures to resolve ambiguous diagnoses; diseases where many healthy patients today undergo costly interventions that ultimately prove unnecessary. By targeting genomic testing to pre-operative psychology samples, our goal is to provide molecular cytology solutions that enable physicians to make more informed treatment decisions in an earlier stage in patient care helping patients avoid unnecessary invasive procedures while reducing healthcare costs.

We launched the Afirma Thyroid FNA Analysis, our first commercial solution, in January of 2011 to address the problem of ambiguity in thyroid cancer diagnosis with an estimated global market opportunity of $800 million. Each year in the US, approximately 525,000 fine needle aspirations, or FNA, biopsies, are performed on thyroid nodules that are suspicious for cancer.

Up to 30% of the time an indeterminate or inconclusive result is obtained by cytopathology in which a pathologist reads a slide under the microscope. Before Afirma, this would typically lead to surgery to remove all or part of the thyroid, yet in most cases the nodules prove to be benign meaning that the surgery was unnecessary. These surgeries are invasive, costly, and typically result in lifelong thyroid hormone replacement therapy for the patient.

Our Afirma solution integrates cytopathology with the Gene Expression Classifier, which we refer to as the GEC as its centerpiece. The GEC employs a proprietary 142-gene signature that pre-operatively determines whether thyroid nodules that are indeterminate by cytopathology can be reclassified as benign.

Multiple studies, including data published in The New England Journal of Medicine, have demonstrated that the GEC can reduce the surgical pool by approximately 50%. In accordance with recent recommendations in the National Comprehensive Cancer Network, or the NCCN guidelines, patients with a GEC benign result cannot for watchful waiting in lieu of diagnostic surgery. This can improve their quality of life and deliver substantial savings to the healthcare system.

We have demonstrated that this surgical reduction is occurring. Multiple peer-reviewed published studies have shown that a GEC benign result reduces surgeries by 90% compared to historical surgery rates for indeterminate thyroid nodules without GEC testing.

Samples for both cytopathology and the GEC are collected in our Afirma collection kit on the patient's first FNA procedure. A report with actionable results is delivered to the physician in less than two weeks.

This model maximizes patient benefit, fits neatly into the physician's office workflow, and allows for optimal management of utilization for payers. Since the commercial launch of Afirma in January 2011, we have received over 60,000 FNA samples for evaluation using Afirma and have performed approximately 12,000 GECs to resolve these inconclusive cytopathology results.

We target Afirma to the approximately 3,500 endocrinologists in the US to manage patients with thyroid nodules and who tend to perform most of these FNA procedures right in their offices. We market and sell Afirma through our specialty sales force that works alongside Genzyme sales reps who co-promote Afirma with Thyrogen, a product that is used by our physician clients to manage patients undergoing thyroid cancer treatment. Through our global co-promotion agreement with Genzyme, a subsidiary of Sanofi, we have the potential to co-promote Afirma in 42 countries around the world.

Now turning to our key accomplishments for the quarter, we are pleased to have successfully completed our initial public offering earlier this month raising gross proceeds of $65 million. Our third-quarter 2013 revenue was $5.6 million compared to $3.2 million for the third quarter of 2012, an increase of 74%. We received 12,417 FNA samples for Afirma in the third quarter compared to 7,052 FNA samples received during that same period in 2012, an increase of 76%.

On the reimbursement front, we made significant progress with positive medical coverage policies for the Afirma GEC from both Humana and SelectHealth, part of the Intermountain Healthcare Network. These decisions follow on the heels of positive coverage decisions earlier in the year by Aetna and UnitedHealthcare along with Medicare who made a positive coverage decision in 2012. These payers collectively represent more than 100 million covered lives.

Building on our library of strong clinical evidence for Afirma, in October positive data from the first long-term multicenter patient outcome study was published in the Journal of Clinical Endocrinology & Metabolism. These data confirmed both the clinical validity with a 98% negative predictive value and the durability of the clinical utility showing benign results were durable for the 6 to 12 month follow-up with an average follow-up of 9 months for the Afirma GEC benign results. These findings were also presented at the 83rd annual Meeting of the American Thyroid Association.

Additionally, earlier this month, we presented data at the American Society of Cytopathology's 61st Annual Scientific Meeting. These data demonstrated that the Afirma GEC, when supplemented with an additional set of genes, may accurately identify medullary thyroid cancer, or MTC, an aggressive form of thyroid cancer among indeterminate samples that have been classified as Hurthle cell neoplasm by cytopathology. Under the microscope, MTC often appears like Hurthle cell neoplasms, a type of thyroid lesion that is usually classified as benign, an interpretation that could lead to suboptimal patient care.

These data support our plan to launch the Afirma malignant GEC in the second quarter of 2014. This will be our second product in endocrinology under the Afirma brand and will provide physicians additional information about thyroid malignancies pre-operatively, which we expect will help guide surgical strategy.

We were issued our first patent in September 2013, covering 60 claims associated with the Afirma GEC covering broad areas of clinical decisions, level of performance, and gene combinations which are used to inform our results. We also have additional patents pending and during the quarter we acquired a portfolio of thyroid patents to augment and strengthen our IP fortress in the thyroid space.

Also in the quarter, we received a New York State Department Health clinical lab permit for our CLIA laboratory facility located in Austin, Texas. This will enable us to process all incoming FNA samples at our Austin facility resulting in cost efficiencies and quicker turnaround times given that our partner, Thyroid Cytopathology Partners, is co-located with us at the Austin site.

Looking forward to 2014 with our IPO proceeds in hand, we plan to make key investments to accelerate the growth of Afirma. With over 100 million lives now under coverage and NCCN guideline recommendations in place, we plan to double our internal sales team by the end of next year providing more granular coverage in high-value geographies and gaining more leverage through Genzyme colleagues.

We believe the launch of the Afirma malignant GEC in the second quarter will fuel increased adoption and growth with the expanded value proposition of this product. Further to this growth plan, we expect also to selectively launch Afirma in several international markets beginning in 2014 through our partnership with Genzyme.

We continue to look forward to the inclusion of the Afirma GEC in additional clinical practice guidelines and to positive coverage decisions from additional payers. And lastly, we remain on track with our R&D efforts for our second vertical in the area of pulmonology with a specific focus on patients who are suspected of having idiopathic pulmonary fibrosis or IPF. We expect to present preliminary IPF data at a pulmonology scientific meeting in 2014.

With that, I'd like to now turn the call back over to Shelly who will review our financial results for the quarter.

Thanks, Bonnie. Our third-quarter financial results are included in our press release that crossed the wire earlier this afternoon.

In line with what reported for preliminarily in the prospectus, revenue for the third quarter ended September 30, 2013, was $5.6 million compared to $3.2 million for the same period in 2012, an increase of 74%. The increase in revenues from 2012 to 2013 was due to increased reimbursement in collections for Afirma especially from commercial payers.

Revenue for the nine months ended September 30, 2013, was $15 million compared to $7.2 million for the same period in 2012, an increase of 110%. We received 12,417 FNA samples in the quarter versus 7,052 in the same period in 2012, an increase of 76%. Approximately 20% of these were gene expression classifier tests performed to resolve indeterminate cytopathology results consistent with 18% in the same quarter of 2012. We continue to guide the number of GECs in the 18% to 20% range as a percent of FNAs received.

I'd like to take this opportunity to discuss seasonal factors that affect our business. Our business is subject to fluctuations in FNA volume throughout the year as a result of physician practices being closed for holidays or medical meetings that are widely attended by our ordering physicians.

Vacations by physicians and patients tend to negatively affect our volumes more during the summer months and during the end of your holidays compared to other times of the year. Prior reimbursement rates in cash collections are also subject to seasonality.

Research and development expenses for the third quarter ended September 30, 2013, were $2 million compared to $1.7 million for the same period in 2012. The increase in research and development expenses from 2012 to 2013 was primarily due to increased personnel expenses as well as expenses to secure intellectual property that will augment our existing thyroid patent portfolio.

Selling and marketing expenses for the third quarter ended September 30, 2013, were $3.3 million compared to $2.3 million for the same period in 2012. This increase was primarily due to $700,000 in net expense recognized under our co-promotion agreement with Genzyme partially offset by amortization of the deferred fee. The remaining $200,000 increase was due to increased personnel expenses and marketing promotional materials expenses offset in part by a decrease in consulting expenses.

General and administrative expenses for the third quarter ended September 30, 2013, were $3.2 million compared to $2.1 million for the same period in 2012. The increase from 2012 to 2013 was primarily due to increases in personnel expenses primarily from greater headcount, increased professional fees primarily due to non-capitalizable IPO-related audit and legal services, and increased facilities expenses.

Net loss for the third quarter of 2013 was $6.3 million or $6.59 per common share compared to a net loss of $4.9 million or $7.49 per common share for the same period in 2012. The increase in net loss compared to the corresponding period in 2012 is due to the increase in revenue being more than offset by the combination of higher cost of revenue reflecting a greater number of FNAs processed and increased general administrative expenses, especially as we prepared for our IPO.

I would note that the net loss for the nine months ended September 30, 2013, included interest expense of approximately $100,000 associated with our $5 million drawdown under our loan and security agreement and also included a non-cash charge for a two tranche Series C preferred stock financing which appears under the other expense on the statement of operations. Other expense was $2.1 million for the nine months ended September 30, 2013, and is primarily related to the increase in the fair value of the preferred stock liability associated with our obligation to issue additional shares of Series C convertible preferred stock and the increase in the fair value of the preferred stock warrant liability that rose as a result of the debt. We did not incur any additional expense associated with the preferred stock liability through the three months ended September 30, 2013, as a related second tranche of the Series C preferred stock was issued in June, 2013.

Cash, cash equivalents, and investments totaled $15.4 million at September 30, 2013. Subsequent to the quarter's close, we closed our IPO on November 4 and we received $57.9 million in net proceeds from the offering. I will now turn the call back over to Bonnie for closing remarks.

Thanks, Shelly. We are pleased with the progress that we have made in the quarter. We are excited to be a public company and to have generated interest among such a high caliber group of investors which will enable us to continue to execute our strategy.

We'd like to thank the patients, their families, physicians, all of our employees, and our investors who have helped Veracyte achieve our goals to date. And we look forward to continuing to make great strides as we pioneer this new field of molecular cytology to improve patient outcomes and lower healthcare costs. Would the operator please open up the call for questions now?

Yes, ma'am. (Operator Instructions) Daniel Brennan, Morgan Stanley.

Congrats on the first quarter. Maybe just a first question on, we have one quarter left in the year, obviously, maybe you can give us a little color on how you're thinking about the outlook for Q4?

We're nearing the end of November coming up, and we're actually quite pleased with the way Q4 is shaping up. October was very strong and we're seeing nice growth as well in November with FNA volume.

Historically, our Q4 has been a stronger quarter than Q3 but I think the only caution is as we approach the end of the quarter holidays, with Thanksgiving coming up and then with Christmas falling in the middle of the week on Wednesday, we're not exactly sure how many days we might lose there with FNA volume. But other than the seasonality associated with the holidays it's looking very promising.

Okay, so I guess it's just difficult to determine at this point if you're saying you'll be -- is it fair to say you'll be up sequentially given that timeframe or have you thought about could you give us some color on the guidepost there, or -- ?

We expect Q4 will be -- will have a step up from Q3 now that we're through that summer doldrums of slowdown, yes.

Got it. Okay. And maybe as you think about now with the IPO proceeds in hand, I think you discussed really ramping the sales force as we head into 2014, maybe just give us a little more color on use of proceeds for the deal and where are you with beginning that process?

Absolutely. We've got a lot of plans now to begin accelerating our growth especially with the 100 million lives under coverage. And I will ask Chris Hall to maybe walk through those points since he leads the commercial expansion effort.

Thanks, Bonnie. We're really focusing in the near term on accelerating what we're doing in sales and marketing.

The first one that Bonnie mentioned on the call is that we're going to double our field force this year. We've got about 8 people in the field and we intend to take that to 16 as we go through the year. We think that will really put us in a nice position to leverage some of the positive momentum from getting over the 100 million covered lives.

The second thing that we're going to be focusing on this year is to launch the Afirma malignant GEC, which we plan to do in the second quarter. And that will really help provide information for a physician to guide strategy on surgery pre-operatively. And we think that'll provide a nice catalyst for us in the short term and also help underline the value of everything that we're doing with the Afirma GEC.

We hope as the year goes on that we will be able to take advantage of potential Afirma inclusion into guidelines. We expect some of the societies this year to hopefully update their guidelines, which will give us some positive momentum that we can leverage as the year goes on. And we also believe that getting positive coverage by other insurance companies will help drive us.

And the last thing we're focusing on this year is international expansion. We spent this year putting some of the foundation in place in some of the countries around the world.

And we look forward this coming year to begin launching in some of the countries as we move through the year. So that's what we're going to be spending some of our time and money and focus on as we start 2014 and drive through the year.

Great. And maybe just one more quick one on lung. I know you mentioned 2014 for the next kind of update there, is there any more granularity about when during the year that would be, data would be presented, or there would be an update?

We're really excited about lung. We sort of view lung as the opportunity to replay the playbook with thyroid.

As you know, these patients that present with a suspicion for interstitial lung disease are very, very complicated to diagnose today. So our new product that is in biomarker discovery is advancing along to be able to provide information today genomically that you can only get by going to surgery. So we're very excited about it.

We are at the stage now where we have multiple sites both in the US as well as in Europe that are being secured under IRB prospective clinical trial study plans and they will begin enrolling patients and sending those samples over as part of the study plan. And we have some preliminary data expected that we hope to release perhaps midyear at one of the more important lung meetings where we can showcase some of those highlights.

So things are moving along very well and we're excited about the opportunity to really help these patients both avoid surgeries but improve the diagnostic ambiguity that molecular cytology promises to do. Thanks for asking, Dan.

Great. Thanks a lot.

Amanda Murphy, William Blair.

Just a quick question on Afirma malignant GEC if I can. Curious, you've mentioned in the past some target market numbers for that assay. I'm just curious if you can provide as an update is it still the $40 million?

And also curious how that would play into existing payer contracts or coverage decisions? Would you need to get incremental coverage from each payer for that to be reimbursed?

We're actually really excited about the malignant GEC because this gives us the opportunity, as the data suggests, to continue to provide pre-operative value in patient care, in this case avoiding perhaps different types of surgeries than what we're doing with the Afirma benign result. So we have indicated with some published press releases a couple of weeks ago on new data that we presented at one of the meetings showing the evidence that with an additional set of genes, the GEC itself may be able to inform preoperatively on patients with medullary thyroid cancer.

We believe since today many times these patients are not definitively diagnosed until after surgery that if they can be informed pre-operatively then perhaps a more correct surgical strategy can be deployed. And the patient can be treated with a full central net dissection and lymph node testing at the time of the first surgery and potentially avoid a follow-up, so it will be very important.

The test is, we're still working on the specific positioning and pricing strategies, so I don't want to get into too much of that. But we believe that it will offer value as an extension to the Afirma GEC on patients that are currently getting the GEC done on the indeterminate cases by cytopathology.

But there will be the opportunity to extend our testing for Afirma to include perhaps the cytology suspicious and malignant cases today, whereby having this information pre-operatively could add that benefit to case patient care. So it definitely can extend our testing sample base beyond just the indeterminates, and because we're offering Afirma as a full solution for every patient that is getting an FNA, it fits neatly into our Afirma solution since those samples are coming to Veracyte anyway. So we look forward to, perhaps at our Q4 call in Q1, providing a little more detail and color on exactly how that product will roll out in Q2.

Okay. Got it. And then another one, just switching topics.

So I think one of the metrics that people track is the percentage of revenue that you guys are booking on an accrual basis. And I know that typically or at least to date it's Medicare, and I'm assuming it is still that way. But I'm curious just given that's something that I think a data point that we'll all follow, is there a way that we can monitor that over time?

At what point do you expect that number to change? Is it a year from now or six months from now?

That's a great question and I'm going to ask Shelly to step in and address that for you.

Yes, so as we disclosed, we primarily are on a cash basis when we receive the payments although Medicare is on accrual basis as well as the co-payments for Medicare and a few other small payers. We would anticipate that as we move into contracts with some of those that are covering us today, that we would begin to accrue after we can show that there is predictability of those collections.

So it may not be on day one. It may take a quarter or two to be able to assess whether we're getting paid at that rate including co-pays and things like that.

We believe that we should wait and probably announce the contracts as they come up on a quarterly basis in these calls and probably not by issuing a press release. And then we would give, over time as we have more accruals, we would give those numbers over time on these calls. So today we do receive about 35% of our revenue from Medicare, those are the billings and about 22% from the actual, the actual billings are 22% in the collections are about 35% as disclosed in the prospectus.

Okay. Got it. And then just last one.

I'm sure you saw the announcement or the FDA's sort of making some comments about 23andMe. I know that's not correlated to you guys in terms of that being a direct-to-consumer assay, but I'm just curious they've made noise about increasing regulation around LDT over the past four years or so.

Any insight there in terms of your strategy with the FDA? You obviously have a lot of clinical data, so just curious how you're thinking about it going forward?

It's obviously top of mind with today's announcement. We do track very closely the work that the FDA is doing and their efforts to better regulate the industry both in some of the work they've recently announced around the next-gen sequencing technology area as well as the lab-developed test regulation.

As you know, those guidance documents have been going through revision and evolving over the last several years. So we try to pay close attention to that.

Of course, it's difficult to speculate in terms of when anything more specific might come out. We do believe, though, that any of these tests that are going to be used to change patient care have to carry with them a good level of evidence. And we have tried to focus on building up that library of evidence so that as these opportunities come up that we have peer-reviewed data out there that can be easier to, certainly, help the doctors have the confidence that the test we are performing are well validated and live up to the utility that has been shown.

One of the reasons I'll just add due to the question, one of the reasons that we chose to put our test in the laboratory on the AssayMetrics platform was the fact that they do have FDA clearance on that platform. So we've been trying to stay in tune with these decisions and movements as they've been made over the course of the last several years.

Got it. Okay. Thanks very much.

(Operator Instructions) Doug Schenkel, Cowen and Company.

I guess a lot of my questions are really follow-ups or clarifications. So I guess my first one, or my first couple are, really based on the comments that Shelly made in response to I think Amanda's question on accruals.

First, is it fair to assume that one-third or 35% of revenue recognized from the quarter was via accrual and the balance was cash recognized based on the comments you made. And then, I guess, the second question related to the question on accruals. Can you provide any metrics on how cash collection times are improving relative to, say, this time last year?

I think that second one's important not just from a modeling standpoint but also because, and tell me if you disagree, I think improvement in cash collection times can often times be a good predictor of you getting closer to the point where you might actually be able to move into contracts and ultimately be able to accrue those revenues. And I'll stop there. And I have a couple more.

We'll ask Shelly to take the first one on the accrual versus cash, Shelley.

Yes, that is fair then to assume that whatever the rate is that we have given to you for Medicare in the various filings is the rate that is currently the accrued rate. There are a small number that are also accrued, a very small number.

And so, basically, the accruals to date are from Medicare. So that is the way, currently, to analyze that.

I'll try to take the question regarding timing to collect an amount collected from cash. As you know, reimbursement is one of the challenges in these businesses and we have always looked at that as kind of the key into the roadmap building the deep library of evidence to try to gain access into standard of care through guidelines. And that ultimately that would drive coverage and reimbursement.

And we're actually quite thrilled at where we are along that journey, but as you know it is a journey. So last year at this time, we were actually continuing to build up the Afirma GEC using stat codes which is the way that we launched.

And during that process we were able to collect a little bit quicker because the stat coding system in reimbursement allowables had already been established by many of the payers. So we realized some benefit from that in terms of quickness of payment, but were limited on the upside in terms of the allowables not always allowing us to get the full value that we believed the test warranted.

At the beginning of this year with the changes in a lot of the payment schemes and the fact that that point in time we had been privy to some very positive news on coverage decisions that were moving along, we shifted our processing over to bill miscellaneous codes for the Afirma GEC. And now that several of the payers are under coverage policy, we're able to realize, really, the full value of the tests at what we build to based on the fact that a medical coverage policy decision has been made.

Since that began in Q1, it actually took us a little bit of time to develop the history around that. But we definitely know that we are collecting at a faster pace than where we were at the beginning of the year. I don't know that we are going to give you exact days outstanding on any of that just yet, but the strategy is working.

As Shelly pointed out, then the next step along the process will be at the appropriate time determining whether or not we want to enter into contracted rates. Once contracted rates are determined and we can get comfortable with a history of expected payment then -- that will be based around both allowable and patient pays -- at that point we will be shifting over to accruals which will certainly streamline the projections. And it makes the revenue a little more predictable than the cash basis today. Is that helpful?

Yes, that is helpful. I guess if I could take the liberty of just asking a couple more.

Bonnie, in your prepared remarks you spoke about doubling the size of the sales force over the next year. And I know Chris gave some additional details in response to one of Dan's questions earlier.

So with that in mind, I just want to make sure is the doubling of the sales force just counting internal hires, not detailing from Genzyme. So that's really the first one.

The second one is could you talk a little bit about the potential for additional detailing from Genzyme both in the US as well as abroad? And then I guess the third one is, in the aggregate, where do you think head count goes from here?

I think we know the plans now for the next year, but I'm wondering if you feel like this is sufficient to drive you to the growth targets that you've outlined for the next couple of years. And I guess related to that, do you envision using these hires to drive sales in additional areas as you expand the product portfolio both into malignant GEC and lung?

I think Chris will walk you through the numbers here in the US and how we expect to extend that into the international. And then, perhaps, I can come back and take the question around the lung.

We'll start with the way -- so the doubling that I talked about was referring to the Veracyte reps. So we envision taking that from 8 to 16 this year.

And then the Genzyme reps would stay constant at the way that they staff the US, so that's the increase that we see. In terms of, and their reps are tied in with our reps and work hand-in-hand and we incent them to work together and collaboratively and we think that's really worked well over the last couple of years and plan on that working well.

One of the things that's been really clicking in well has been that Thyrogen, their core product that's promoted alongside Afirma, is now available throughout the country. And so they have a nice story to tell when they walk into the physician about Thyrogen and its ability to make a difference in patient care and integrate a bigger clinical story as they talk about Afirma's a part of that. So that rhythm and beat is something that they've gotten into nicely and we've done really quite well with it.

The one thing I would note is that our business model is one that, actually, we believe drives a lot of retention. So the focus in the sales reps that we put in there is really to drive top-line growth and moving clinicians, moving Afirma deeper into their practice and converting clinicians that have not been using the product to using Afirma.

Remember that we wrap cytopathology around the GEC and we believe that that integration allows us to be a comprehensive way to help a physician manage thyroid nodules. And that approach is quite a powerful clinical model in and of itself. And the relationship is sustained by cytopathologists talking to doctors, so a doctor-to-doctor relationship that sustains it, which minimizes the need for the sales rep.

So we think with -- our expectation is in general in the US with the level of Genzyme folks in the field and the level of Veracyte folks that we'll have in the field this year, that that staffs us really well to drive it this year and to drive it going forward. We expect this year for the Genzyme team internationally to drive the products. One of our criteria to picking international markets was where they were deep and where they had really strong relationships.

And so we expect them to drive forward in international markets without us putting sales and marketing infrastructure around the globe, at least in 2014. Hopefully that sort of weaves through all of the, gives you the color around all those different questions that you asked. If I'm missing something, feel free to jump back in.

No, that was great, Chris, thank you.

And Doug, I think with regard to those investments and how they relate to lung, I would say that we will be addressing lung as kind of a separate and different channel. And we'll begin to look that direction late next year and into 2015 as we get closer to our planned launch out in 2016 of the product.

Okay. That's great, Bonnie. Thanks to you and the team.

(Operator Instructions) Presenters, at this time it looks like I'm showing no additional phone questions at this time. I'd like to turn the program back over to Bonnie Anderson, President and Chief Executive Officer, for any additional or closing remarks.

Thank you. And I really want to thank all of you for joining us for our first quarterly conference call as a public company.

We're really looking forward to having you all with us as we pioneer the promise of molecular cytology and bring other new applications to market that have the promise of improving patient care and lowering health care costs. We really appreciate all of your support with the business. Thank you.

Thank you, presenters, and thank you ladies and gentlemen. Again, this does conclude today's conference call.

Thank you for your participation and have a wonderful day. You may now all disconnect.