Veracyte Inc (VCYT) 2017 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Veracyte first quarter 2017 financial results conference call. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Miss Bonnie Anderson, Chief Executive Officer and Chairman of the Board. You may begin.

Good afternoon, everyone, and thanks for joining us today for our first-quarter 2017 financial results conference call. Joining me today are Keith Kennedy, Chief Financial Officer, and Chris Hall, President and Chief Operating Officer. Before we begin Keith will talk us through the Safe Harbor statement.

Good afternoon, everyone. We'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities laws. The forward-looking statements include statements regarding our future plans, prospects and strategy, financial goals and guidance, product pipeline and other statements that are not historical fact.

Management's assumptions, expectations and opinions reflected in those statements are subject to risk and uncertainties that may cause actual results and/or performance to differ materially from any future results performance or achievements discussed in or implied by such forward-looking statements and the Company can give no assurance they will prove to be correct. Those risk and uncertainties are described in the Company's filings with the Securities and Exchange Commission in addition to today's press release.

Prior to this call we announced our first-quarter 2017 results, which are available on website, Veracyte.com, by clicking Menus on the top right corner of our website and clicking through to our Investors landing page and then Press Releases. We also released a financial presentation which I will reference later in the call when I cover our financial results. You may find the financial presentation in the same and Investors section under Events & Presentations. I will now turn the call over to Bonnie.

Thank you, Keith, and thanks again, everyone, for joining us today. We think this will be a brief call since we just reported our fourth-quarter and full-year 2016 results a few weeks ago. However, we are excited about the updates we have to share today.

We delivered a solid first quarter with results in line with our expectations and we are off to a terrific start in 2017. Our revenue and Afirma GEC volume growth were strong and we made significant progress towards our financial discipline goals. We have great momentum across our business and a lot to be excited about as we head into the second quarter and through the end of the year.

Looking at our first-quarter results, I will focus on the four metrics that we use to measure success in 2017. They are: revenue growth, reimbursement expansion, evidence development and financial discipline. Let's start with revenue growth.

We continued our strong revenue growth with Afirma revenue for the quarter of $16.4 million, an increase of 21% compared to $13.6 million during the first quarter of 2016. Because virtually all test volume shifted to accrual-based revenue in Q3 of 2016, cash-based revenue declined significantly in the first quarter as expected.

Afirma GEC volume, following the typical quarter-over-quarter cadence coming into the new year, was 5,834, a 9% growth over prior year. This includes a 26% year-over-year increase from GEC only accounts, showing our continued strength in driving this higher-margin segment of our business.

We are well-positioned to accelerate growth across both our Afirma and Percepta portfolios with our expanded sales team which now comprises nearly 50 associates. To further boost our sales efforts, we will soon launch a series of Afirma-focused marketing campaigns to drive demand and adoption among endocrinologists and pathologists as well as patients. These campaigns will use an array of traditional and digital communication strategies and tactics and will complement our ongoing physician education activities.

To further support our accelerated growth we executed an agreement in February with Quest Diagnostics which is now poised to (technical difficulty) Afirma GEC to its large network of physician customers. Through the agreement, which runs through Quest's AmeriPath anatomic pathology business, Quest's physician clients can refer patient specimens with indeterminate cytopathology to Veracyte for Afirma testing.

We are excited (technical difficulty) and believe it reinforces the Afirma GEC's market leader status and will help fuel the test's sustained growth into the future.

To further augment this momentum, we achieved to keep milestone toward the launch of our next generation Afirma test which we have named the Afirma Genomic Sequencing Classifier. We will refer to the enhanced test from now on as the Afirma GSC.

We unveiled a data from our pivotal clinical validation study which will be shared this week during the American Association of Clinical Endocrinology annual meeting. The findings show that by maintaining the high sensitivity of the GEC and further improving its specificity, the Afirma GSC is expected to identify 30% more benign thyroid nodules allowing us to help nearly 70% of benign patients avoid unnecessary surgery as part of thyroid cancer diagnosis.

We are thrilled with these results which we believe will significantly benefit patients, attracting more physicians to adopt the test and furthering our strong market penetration.

The Afirma GSC uses our novel approach of combining machine learning with whole genome RNA sequencing to derive clinically useful information from enriched genomic content that previously was undetectable. This includes not only gene expression, which is used in the current test, but also the presence of DNA variants, fusions, copy number variants and other features that may be predictive of thyroid cancer and can enhance the classifier's ability to distinguish benign from malignant nodules.

Our classifier uses machine learning [ensemble] methods in which multiple algorithms, each playing its own roll, are used to obtain a better predictive performance than any single algorithm on its own.

This same novel technology platform powers our recently launched Envisia Genomic Classifier which is used to help distinguish idiopathic pulmonary fibrosis, or IPF, from other interstitial lung diseases without the need for surgery.

We are excited about this groundbreaking work because we are taking the same machine learning methods that are being used in other fields such as financial modeling, social media and even self driving cars, and using them in ways that have not been previously used in healthcare.

We believe the Afirma GEC will put us further a leap ahead of companies trying to compete in the thyroid cancer space and also provides a robust technology foundation for continued innovation and expansion to address additional unmet clinical needs. We will begin offering early access to the Afirma GSC to select customers during the next few weeks and expect full transition by early next year.

Our second key success metric is reimbursement expansion. We made significant progress with payers during the quarter for both Afirma and the Percepta classifiers. For Afirma we announced new positive coverage policies from 10 Blues plans and have an additional major win with a positive coverage decision from the Blue Cross/Blue Shield federal employee program which established the test as medically necessary benefit for its estimated 5 million members.

The Afirma GEC was the only molecular test for use in thyroid cancer diagnosis to receive such a designation and is now covered for nearly 230 million Americans nationwide through their insurance programs, including more than 75 million Blues plan members.

We also expanded the number of health plan members within network access to the Afirma GEC to approximately 160 million people nationwide, including more than 30 million Blues plans members. This includes contracts with the independents and Wellmark Blues plans, which became effective during the first quarter. We remain focused on increasing in network contracted lives as we believe this is an important lever to drive adoption as well as increase our reimbursement rates.

We achieved final Medicare coverage and pricing for the Percepta Classifier during the quarter through the Palmetto GBA MolDx program. This is a significant milestone that gives us key first mover advantage as we believe Percepta is the first genomic test to be covered by Medicare for use in lung cancer screening and diagnosis.

These policies will make the Percepta Classifier a covered benefit for nearly two-thirds of Medicare beneficiaries in the United States with effective dates between March and May. Pricing for Percepta is and line with our expectations and similar to the Medicare price for our Afirma GEC. Medicare covers approximately half of our target patient population for Percepta and we are actively working to secure coverage policies from the non-MolDxMedicare administrators as well as from private insurers.

Our third success metric is evidence development. The ACE annual conference this week will be exciting for us as researchers present data on the development of the next generation Afirma GSC and also share strong results from the test's pivotal clinical validation study. At that time, multiple abstracts will be presented demonstrating the current Afirma test's long-term positive impact on patient care. We are confident that our enhanced test will replace the Afirma GEC as the new standard of care in thyroid cancer diagnosis.

Looking at our Afirma efforts more broadly, to date we've accrued over 1,000 samples from thyroid nodules patients as part of our 49 site ENHANCE trial. This bio repository includes comprehensive cytology, genomic, histopathology and clinical data and is to our knowledge the largest database of its kind in the world.

This is important because it gives us immediate access to a huge amount of data that will advance our ongoing research and development efforts in thyroid cancer. These are data that would take potential competitors years and millions of dollars, along with expertise they may not have, to develop.

For the Percepta Classifier we continue to build the clinical evidence that will fuel the test's adoption and reimbursement. Later this month external investigators will present study findings at the American Thoracic Society annual meeting, advancing our efforts to establish the Percepta Classifier as a new standard in lung cancer screening and diagnosis. Additionally, a key cost-effectiveness study for the test has already been accepted by a leading pulmonology journal and we look forward to its publication in the near future.

We are following the same reimbursement approach for the Envisia Classifier that we have successfully used for Afirma and Percepta tests in which we build the clinical evidence to demonstrate our test's value and positive impact on patient care. To that end, four Envisia-focused abstracts will be presented at the ATF meeting this month demonstrating the test's clinical performance and utility. These data will help feed the pipeline of published evidence that we plan to include in the packet we will submit for Medicare coverage.

Lastly, our fourth success metric is financial discipline. Our cash burn for the fourth quarter of 2017 was $8.3 million, marking a 28% improvement over the prior year. This continues our strong financial discipline as we set our site on sustained profitable growth and maintaining our prediction of achieving cash flow breakeven by the end of 2018. I will now turn the call over to Keith to review our financial results for the first quarter.

Thank you, Bonnie. Good afternoon, everyone. As I mentioned earlier, in addition to our earnings release you may find our financial presentation on our website at Veracyte.com under Investors and then Events & Presentations. I plan to speak about our first-quarter 2017 results and will reference the relevant pages in the financial presentation as I cover the highlights.

Turning to page 2 of the presentation, the financial highlights for the first quarter 2017 as compared to the first quarter of 2016 are as follows. Revenue of $16.4 million increase 21%. Afirma GEC reported volume of 5,834 tests, increased 9%. Total operating expenses of $23.9 million increased 3%. Net loss of $8.2 million improved 18%. Net loss per share of $0.24 improved 33%. Cash burn defined as net cash used in operating activities and net capital expenditures of $8.3 million improved 28% and we ended the quarter with $51.5 million in cash.

The next three slides in the financial presentation depict quarterly revenue trends. For the first quarter of 2017 on average we accrued between $2,300 and $2,400 for the Afirma GEC test that met our revenue recognition standard, which was between 90% and 95% of the reported Afirma GEC test volume.

Over the eight quarters ended March 31, 2017 we generated between $2.1 million to $2.7 million in revenue per quarter from providing cytopathology services as part of our Afirma solution. Prior to July 1, 2016 we accrued less than 50% of the billed Afirma test volume per physical period.

Starting in the quarter ended September 30, 2016 we had sufficient cash collection history to reasonably estimate the amount of revenue to accrue upon test delivery. Thus we began accruing substantially all GEC test volume in Q3 2016 that met our revenue recognition criteria.

Page 4 of the presentation depicts the quarterly trend for accrued revenue and the year-over-year change. Accrued revenue was $15.1 million, or 92% of our revenue this quarter, an 84% increase over prior year.

Moving to page 5, cash revenue was $1.3 million or 8% of our first-quarter revenue, a 76% decline over prior year. We received the majority of our cash-based revenue from Afirma tests performed prior to July 1, 2016. We collected $16.2 million in cash in the first quarter and, based on our cash collection history, we expect the trends shown on page 5 to continue such that we collect substantially all revenue for tests performed prior to the third quarter of 2016 by June 30 this year.

Stepping back for a second, this is my first full quarter as CFO. Given the growth in our business I thought it might be helpful to level set or explain how I think about the high level building blocks of our revenue model. To illustrate my point I'm going to explain the four factors that I would use to explain our revenue model to someone that didn't know our business.

Note this is not an exact build of our first-quarter 2017 revenue, but an illustrative example and I will use the midpoint of ranges previously mentioned or from our SEC filings.

First, volume -- to illustrate my point assume that we report 5,800 Afirma GECs in one quarter and assume that 92.5%, or 5,400 of these Afirma GECs have both sufficient RNA from which to render a benign or suspicious result and an expectation of cash collection.

Second, accrued revenue -- multiply 5,400 accrued GECs by the midpoint of the average accrual rate, or $2,350, to arrive at $12.7 million in accrued GEC revenue.

Third, add the portion of the Afirma solution derived from cytopathology services, or $2.4 million.

And fourth and finally, add estimated cash-based revenue, or $1.3 million in my example, to arrive at $16.4 million in quarterly revenue.

Now turning to slide 6, you can see that cost of revenue since the first quarter 2016 in absolute dollars range from $6.3 million to $6.5 million. Over this period we made significant improvements in our sample collection cost and in labor efficiencies that contributed to the stability and the dollars spent.

We also moved into our new corporate facility in the first quarter of 2016 and we incurred some expenses in that period associated with the move. Volume and revenue are key drivers of our gross margin, quote/unquote. The increase in gross margins in the third quarter of 2016 reflects the increase in our accrued revenue.

On slide 7 we further breakdown the components of our operating expenses and show the percentage of revenue for each category. As Bonnie mentioned, we are investing in our sales force and marketing campaigns to support the anticipated growth in our business.

Slides 8 through 10 cover the trends in our net loss, cash burn and cash position. I would remind our investors that we generally pay out our corporate incentive compensation plan in the first quarter. I will now turn the call over to Bonnie for closing remarks.

Thanks, Keith. To wrap up, we are extremely pleased with our first-quarter accomplishments and believe we are positioned to deliver great results in 2017. During the quarter we put a number of pieces in place to accelerate growth, including: 11 additional Blues plans now covering the Afirma test; our Quest agreement, which is signed and ready to launch; and the advancement of our next-generation GEC.

We secured Percepta coverage and pricing for Medicare patients and can now accelerate commercial adoption. We are on track to achieve our business goals for the year and reiterate our 2017 annual revenue guidance of $76 million to $84 million and annual cash burn of $25 million to $27 million.

Moreover, we are forging new ground in the genomic diagnostics field. In an era when science and technology advances are fueling a relentless thirst for more data about people's health, we provide clinically useful results that are backed by rigorous evidence and enable physicians to make different patient care decisions.

Our powerful combination of machine learning expertise and deep clinical and genomic knowledge is enabling us to bring new solutions to bear as we ask the right clinical question to inform meaningful changes to patient care. We are creating a new standard of genomic truth and resolving the critical problem of diagnostic uncertainty by providing answers without the need for risky, costly and often unnecessary surgery.

This is the age of evidence and we are clearly leading in it. Thank you for your time and attention today. I'd now like to ask the operator to open the call up for questions.

(Operator Instructions). Puneet Souda, Leerink Partners.

Yes, hi Bonnie and Keith. Thank you for taking the question. So could you give us a sense of, I mean, the progress that's been made so far? Obviously you have more improved reimbursement -- with a new test coming at ACE. Could you give us a sense of where do we stand in penetration currently? How far do you see that ramping through the year? The guidance is somewhat unchanged. So could you give us a little bit more color there?

Yes, thanks for joining us and for the question. Well, I think that the introduction of the next generation of the GEC, following what has been five years from the introduction of the first test, is quite timely. It's pretty amazing that we've penetrated the market by nearly 30% with that first test.

And when you think about the value the payers are reimbursing for Afirma, it is a combination of their confidence that the clinical results are accurate and, B, the value that is being delivered in removing patients that don't need to undergo surgery from the operating room.

And what we are really thrilled about with the results in the GEC is the fact that we will be maintaining the same high sensitivity and validated the test in a way that will drive confidence from payers but we will actually deliver more value. We will be able to increase by 30% the number of patients kept out of surgery.

So we believe this is really timely introduction, this week the data will be unveiled and we will begin to -- we already have a list of interested parties for early adoption and that adoption will ramp as we transition but also bring new people into the Afirma family with the introduction of this new product.

And we think that combined with the relationship we've built with Quest will really fuel some great growth coming into the back half of the year with Afirma. Chris, is there anything you'd like to add?

The only thing I would add is that we've made significant progress this quarter and continuing to expand our sales team. We are now nearly 50 professionals in the field and we believe that that extended reach throughout the country is setting us up to be able to go deeper into accounts, do more calls into those accounts and be able to drive greater penetration and we are excited that we are on pace to do that.

And the second thing that they've started to do is drive the dialogue with Percepta into health systems and hospitals. And we are seeing some success in those dialogues. So we really sit here at the end of the first quarter excited with all these different trends coming together.

Okay great. Thanks for that. And on Percepta briefly, looking at the rest of the year with the pricing already in place and having more clarity there, do you think -- I mean, could you give us a sense of potentially around the ramp there? And thanks for the comments on the sales force. But do you think the sales force is adequate enough to support that ramp through the year?

Yes, it's Chris. We do. We thought very deeply as we started the year how many people we needed in the field to be able to drive the Percepta product. And at one of the key things I will remind you that we are trying to accomplish in this rollout is to manage it with one sales force with Afirma and Percepta in order to continue to drive the Company towards profitability. And you see we've made a lot of progress towards that did this quarter.

And so, combining the sales force and having them be cross trained. And we are seeing them starting to make calls on Afirma and Percepta. And remember that a lot of those clients are in the same hospital, so it all comes together in the hospital-based lab. We think we are on pace to make that successful and we are seeing some early signs of it.

We ramped the sales force early this year. If you remember, we started layering in people early through the year because we wanted to be able to get the folks in place to be trained to be able to carry the product as we came through the midpoint of the year and really started to get traction with Percepta. And where we are right now, we are on pace with where we thought and feel like it's been a good quarter with some early successes.

Great, thanks for taking my questions.

Amanda Murphy, William Blair.

Hi, thanks. I guess I just had a follow-up to that maybe for Keith. So just thinking about guidance for the year, I just was curious how you are approaching the Quest agreement. Obviously that hasn't started to ramp yet, so I just wanted to get a sense of how much upside there might be from that relative to the guidance.

And then also I guess more broadly, are you thinking about expanding that beyond -- I know it hasn't really started yet, so it may not be a fair question -- but just expanding that type of relationship beyond Quest?

I will leave the expanding relationship beyond Quest to Chris; he is probably the best person to address that. In terms of our goals for the year and affirming our guidance, we are on track to achieve our guidance and our business goals that we gave last quarter and reaffirmed this quarter. Our revenue guidance implies a 17% to 29% increase year over year and we hit 21% this quarter, which we believe keeps us on track for the year.

In terms of Percepta, as we said last quarter, we advise people to look back at Afirma in the rollout that we had in Afirma back in 2011 and to -- best shot at giving you an idea is what we did there. And so, it's not a huge contributor to this year, but we expect it to be a much more significant contributor next year. Chris, do you want to --?

I will just say that (multiple speakers) a couple trends coming together where we are in the market in the adoption of Afirma. One is that there is a lot of deep relationships between cytopathologists and MDs reading these slides. And we have had phenomenal success building Afirma with an integrated model and building a beachhead that is by far the market leader of providing cytopathology services to the community.

But the reality is that there is a lot of deep trusted long-term relationships. And so the last couple years we really focused on partnering with local cytopathologists, regional labs and now a big lab with Quest to be able to ensure that Afirma is offered because of the second trend, which is Afirma is now standard of care.

And I think physicians increasingly expect it to be able to be -- that they are able to get access to it and patients certainly are asking for it. And so what we have positioned ourselves and will continue to position ourselves is to partner with labs, local, large, regional, etc., to be able to continue to fuel the growth because that's key to being standard of care.

Does that answer your question Amanda?

Yes, thanks. And then I just had another one on just kind of what you are seeing in the market. I think there was some conversation around other assays that have gotten coverage and whatnot. So I just wanted to talk about that. And then also from a [GCS] perspective, just wanted to get a sense how that maybe positions you competitively as well longer-term.

For sure. We are aware of a new policy that came out actually about a week ago from UnitedHealthcare that was an update to their policy. But I believe from going through that policy, the Afirma GEC was still the only product covered by United in thyroid cancer workup. So we were pleased to be able to see this policy updated and the policy remain intact and in place for the Afirma GEC.

When you think about the GSC transition, as I mentioned earlier, the key point of payers continuing to reimburse and us transitioning them with the GSC is the phenomenal confidence they have because our validation studies are large-scale, prospective and blinded.

And in fact with the GSC we followed the guidance documents that anyone would follow around platform transitions and validated the test using the same blinded cohort that was used for the GEC. So doctors will have lots of confidence and payers will have confidence that those test results can be trusted and in fact deliver greater value to patients.

So I think when you look at really quality designed studies that predict the kind of performance that we are seeing not only with the GEC which has been market-leading, but now even going beyond that with the GEC, the ability to report on some of the rare mutations and fusions such as BRAF and RET/PTC which would be part of this new set of results, and then the potential to go beyond that because of the richness of the technology platform.

We are just thrilled to be able to not only maintain our significant market leading edge, but just further strengthen that competitive position. So it's going to be a fun ACE and meetings for the rest of the year for the Afirma team.

Got it. Thanks very much.

Bill Quirk, Piper Jaffray.

Great, thanks. Good afternoon, everyone. This is Alex Nowak on for Bill today. Just a three-part question on Afirma GSC. One, will you still use the current CPT code on the new test? I think you will, just want to confirm that. Second, is there any cost benefit to using or to running the Afirma GSC versus the gene expression test?

And then I guess third question, looking out at 2018, do you expect the transition over to GSC to slow down any efforts to sign up new accounts just given reps might be busier contacting prior or old accounts to educate them on the change in the test?

Great questions. So we do it tend to use the same code to bill the GSC and the description of Afirma will be maintained under that code. So that should be fine. In terms of cost benefit, I think that the way that we are looking at some of the benefits from our own operations, and we sort of alluded to this in the call, we now have two products, the Envisia product along with now the GSC, running on a single automated line with the same technology and platform.

And so, as you can imagine over time as samples come in the door and go onto the platform in an automated way and run down that pipeline, then the only difference at the end of that assay is which algorithm is triggered to generate the patient results. So it does create efficiency of scale, automation and will give us nice operational leverage over time.

I would say you're not going to see that operational leverage in the next year because we will still be running under capacity with Envisia and we will be running under capacity with Percepta, which is currently still in another platform. But over time and long-term we do expect to gain great efficiencies from a single platform in the lab.

And then the last question was the transition. So, we think that there will be -- how do I explain? So, there are a combination of ways that the GEC is going to really further solidify Afirma in the market. It will be new accounts that get excited about the new technology and the fact that fewer and fewer patients that are suspicious and go to surgery are found to be benign. So, we think that's going to have a great value in pulling more doctors in.

There are also doctors today that may pick and choose which patients in their own lab they send for Afirma to try to confirm those patients that they believe are benign so they can run through the GEC and, if benign, moved out of surgery. We think this new technology platform will allow us to go deeper and get more of the samples within those existing accounts. Those are existing clients.

And then lastly, there is always the academic centers that typically don't spend a lot of time on patients with mostly benign thyroid nodules. That's not what they do. What they do is manage patients with cancer.

So with this new rich technology platform that we have described and the access to look at fusions and, as I mentioned, the RET/PTC and BRAF, even though these are rare, and all the rest of the features that we are going to be able to bring to bear in advance and answer other clinical questions, we think we are going to become the test of choice for these places as well.

And those weren't typically the accounts that we would be targeting to do testing on routine F&As from people getting a thyroid workup. So, we feel phenomenally excited about the advancements. And not only will we see this play out with Envisia, but now advancing that in the thyroid space, really solidifying advancing that leadership position, we feel like we are in real good shape now.

Okay, thank you. That is very helpful. And then just a second question for me on the sales and marketing. It came up within the quarter, but I think that's just given the investments you made to the sales force.

Should we expect about $7 million per quarter would be a good run rate during 2017? Or do you think there could be other sales and marketing investments you need to make for the Percepta launch in the second half of 2017?

We grew the sales force, as we said, this quarter pretty nicely and you see that in the ramp. We will continue to grow it as we go through the year. So we expect a little bit more trend upwards in that so it will continue to trend as we layer in some more people.

We are still short of our overall hiring plan for the year. And this quarter we are in the process of layering in a few more people in some key territories. So we will see it go up a little bit. But it won't go up dramatically. Do you have anything to add to that, Keith?

Yes, I think you will see something like probably 10% growth in that number over the rest of the year on a quarterly basis my guess.

Okay, perfect. Thank you very much.

(Operator Instructions). Bryan Brokmeier, Cantor Fitzgerald.

Hi, good afternoon. I understand that Quest has just begun offering Afirma, but how much training is their sales force undergoing? And where are they in that training? And are there any early signs of adoption by new physicians through Quest?

Yes, Bryan, it's Chris. We just started the journey, so we are early to really have anything significant to report you. We have put together with them we think a pretty comprehensive training plan for them to be able to work with their clients. But I would add, too, that their cytopathologists are involved in that because the cytopathologists I think are also excited to have access.

And so, they are part of telling a story and that's always a better place to have physicians telling the story. And so they've been well trained. And I think that there is -- and there's certainly linkages in the field between reps where appropriate. So I feel like we are in a good spot, but we are really just in that early part of the journey with the implementation. And so, I think we will have better insight into that on the next call.

Yes, I think to add to that, we I think originally thought that it would get kicked off by the end of Q2. The good news is we are right in that right now.

We are right in that kickoff phase.

Okay. And it's been almost a year since Anthem updated its coverage decision and they didn't provide any coverage for Afirma still. We thought that there might be a policy update off-cycle, but it's now due for their annual review. Have you had any recent discussions with them and do you have a sense for what is delaying them?

Well, I mean we are always sharing information because the evidence for Afirma gets deeper and deeper as we go and there has been some really great clinical utility studies published this last year and we certainly made them aware of it. And I think actually the deepening of the literature around Afirma making a difference in the treatment of patients has really driven the 11 Blue Cross/Blue Shield plans that did flip this quarter and started to cover the product.

So we believe that we continue to be optimistic that Anthem will get there. And you are right, this is -- they are coming through the normal cycle and didn't happen off-cycle as we thought it might. But I can never guess and we have always said we can never guess when these things may happen. But we think that the evidence is in place and most of the other Blue Cross/Blue Shield payers have agreed and so we continue to be optimistic.

We have actually been quite pleased at the incredible progress we've made with the rest of the Blues plans in light of that. But we are still very optimistic that we will get there.

The good news is most Americans with a Blue Cross/Blue Shield plan now have access to Afirma as it's medically necessary.

Okay, thank you.

Paul Knight, Janney Montgomery.

Hi, this Carolina Ibanez-Ventoso on for Paul Knight. I was wondering if you could provide an update on any progress attained in building clinical utility evidence for Envisia. And also when can we expect a data readout for this program?

So hi, Carolina, it's nice to have you on the call for Paul. So our Envisia sites, as you know, we began the early access and continuation of access through our prior clinical trial sites for Envisia and are actively collecting the -- I think I'm maybe getting confused with Percepta. Were you asking Envisia or Percepta on clinical utility?

Envisia, yes.

Okay. So that's a little bit earlier stage. We are advancing that on the Percepta and Envisia is in the early stage. We are getting sites set up under a registry. We have got protocols for clinical utility studies and studies that have been conducted, not the long prospective ones, but other studies on that data that look very encouraging. And there is actually a lot of enthusiasm.

Our team has worked extensively with the Pulmonary Fibrosis Foundation and the centers of excellence and some of the top leaders in IPF. Dr. Neil Barth, our Chief Medical Officer, is very actively working with all of them as these protocols and execution of that comes together.

So it's a little early, but we are very encouraged with where we are and are looking forward actually to accelerating the deepening of the evidence around Envisia since that will be the key part of pulling this package together to take to Medicare. We still believe that next year will be our Medicare coverage point.

And then just reminder, I did mention that at the ATS meeting we are going to have four abstracts there at that meeting on Envisia and that will really be key to rounding out the evidence that we'll take for coverage. So it's moving right along.

Okay. And then for CMS coverage, is it reasonable to expect a draft from CMS within the same timeframe that happened with Percepta, like about 17 months post-launch?

We have pointed to expecting early 2018 would be that timeframe. And I think we've seen nothing that would change our thoughts on that. And everything is moving along nicely on that track.

Okay, thank you very much.

We have no further questions at this time. I will now call back over to Bonnie Anderson, Chief Executive Officer and Chairman of the Board, for closing remarks.

Thank you all for joining us today. We appreciate your ongoing support and look forward to updating you on our progress in the future. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.