Caris Life Sciences Aktie

Okay. Great. Hi, everyone. I'm Evie Koslosky, the life science tools and diagnostics analyst here at Goldman Sachs. I'm here today with Caris Life Sciences, Inc. They're going to start with a presentation, and then we'll open it up to Q&A at the end.

Okay. Evie, thank you. I'm Brian Brille. I'm Vice Chairman of Caris Life Sciences. I'm here with Milan Radovich, our CSO; and Luke Power, our CFO. And I think I would just start by saying that while we've been at this since 2008, and our founder had this vision around precision medicine and precision oncology. But I would say that we see more opportunity in the market in terms of working with cancer centers, both at the institutional level as well as the individual oncologist level than we've ever seen.

So this whole revolution in molecular medicine and transitioning from sort of the previous way of looking at things to a true state-of-the-art in molecular medicine from both a clinical and research perspective is happening. It's happening very quickly. And we think we have huge edges as a result of building this platform over many, many years. I would suggest that these platforms really matter. The ability to be a partner and deliver the best technology at the individual oncologist level and to be a partner with the institution is what it is going to take to really be one of the true leaders in this space. And I think that's defined by technology. It's defined by scale. It's defined by data set importantly in this area. Remember, these are -- we are -- and these are real AI type of companies. And all of this needs to be delivered through a channel.

So we've had, we think, the best technology from the beginning where whole exome, whole transcriptome, and we're moving towards whole genome, which we'll talk about. In terms of scale, we profiled over 200,000 patients last year, and that's going up very significantly. Our data set now is over 1 million profiles, most of which are whole exome whole transcriptome and the vast majority of which are matched with clinical outcomes information. And the channel is very important. You've got to reach the physicians. You've got to be in a position to be a real partner with the institutions.

We're reaching over 6,000 ordering oncologists, and we're very excited about how the platform is progressing as well. So this leadership from a technology perspective, we're the only company with an FDA-approved whole exome, whole transcriptome technology. That has helped us with our partnerships. It's helped us with research, and it's also helped us with our reimbursement. We're expanding to whole genome initially with Caris ChromoSeq, which we launched recently in the heme area as well as with our multi-cancer early detection, Caris Detect. We go to market in a highly differentiated way. We support the physicians from a clinical perspective.

We set up precision oncology programs, and we also are a very attractive research partner through the Caris Precision Oncology Alliance, which is now at 100 member institutions. We're launching new products. We just launched Caris ChromoSeq, which is a whole genome solution for heme profiling, which Milan will speak about. Caris MI Clarity is very exciting. It's a digital pathology solution, very quick as a result, uses our extensive data set, and this is for early-stage breast cancer. The data asset that we have accrues in scale, relevance and value all of the time. We're over 1 million genomic profiles. And these AI tools that we're using benefit from this.

So this is driving not only our internal R&D, but also our attractiveness as a partner. One of the key things about our platform is our profitability. So that gives us huge leverage in terms of the ability to invest. We're investing in our commercial team. We're expanding the size. We're doing a variety of different things there, which we think are going to really help us with respect to the upside in our clinical case volume as well as continuing to invest in our product pipeline from MCED over on the right here from MCED, which has been a passion project of our founder since the very beginning, and we think is -- opens up an entirely new world in terms of reaching basically everybody, not just late-stage cancer patients. MRD, our tissue naive and tissue-informed approaches Milan will speak about.

And the other thing we'd say about our platform, because we are so broad and so deep in the information that we generate, we've been looking at this for a number of years now. This gives us signals and information around all disease states, autoimmune, neurology, CNS, cardiology, et cetera, which we're extremely excited about. Our data set, you can see, continues to grow very nicely. We think we have the largest transcriptome data set in the world at 728,000 transcriptomes. The vast majority of this over 1 million size data set is matched with clinical outcomes. And we also have an extraordinary set of digital pathology slides. So every slide that comes in now is digitized. So this has become a real factory in terms of the generation of that data set.

In investor meetings, we get a lot of questions around the market. Is it getting penetrated? Is it slowing down? And I'd say it's as exciting as it's ever been. The TAM is large, and this is just for therapy selection. It's large. It's growing. By our count, it's only about 35% to 40% penetrated, earlier staging is coming into play as well as a broader set of therapeutics, et cetera. So -- and not to mention the fact that we think we are pushing the definition itself of CGP, comprehensive genomic profiling beyond panels, beyond larger panels into whole exome, whole transcriptome and now whole genome. Molecular profiling has emerged as standard of care. There's no question about that. It wasn't that long ago at ASCO when a number of the podium presenters were talking about it's not a question about whether every single patient needs to be profiled they do. It's just a question of what technology you use and what partner you choose.

So this then relates to precision oncology programs. So we're seeing a whole new generation of very thoughtful cancer center directors coming into place and they're thinking about, okay, how do I set up -- how do I not just get all of my physicians profiling consistently and systematically, but how do I set up a precision oncology program that generates the right data that has the best clinical outcomes. And who -- and this is hard. I mean, we have a cancer center director sitting here. I don't have to tell Steve how hard that job is. So the whole notion of being able to set up a program, a programmatic approach that does this is not easy. And that's how we think about our business. That's why we have 50 PhDs in the field, molecular science liaisons that are deployed for that purpose.

We have account managers. We have a highly matrix set of people supporting the cancer center directors and their institutions to deploy these sorts of programs. So for these reasons, we're very excited about the trends about the future. And this notion of cancer centers moving towards institutional decisions at the top of the house, not just individual oncologists doing whatever it is, he or she wants to do, I think, is very important, and it relates to our ability to deliver all of these capabilities. So this is a little bit on our channel. We've always had a patient-first philosophy. So even the move a number of years ago to whole exome, whole transcriptome was motivated not for the data per se or the data applications, but by clinical utility and the notion that this is the best thing for the patient today is the best thing for the patients in the future as well.

Our platform today is about 270 people, field-based team. We -- that number had gone down a little bit during the period of time right before the IPO when we were capital constrained. We have the opportunity now to reinvigorate that, invest in that business. That's what we're going to do. We have a new Chief Commercial Officer, who is highly dynamic. So he's adding people. So we're hiring. We've increased the number of territories significantly, and we'll continue to do so. And we're also putting product specialists in the field that can be very articulate and helpful with respect to supporting the different product capabilities. We also have a strategic coverage team, which we're quite proud of. We think we cover the top of the house extremely well across the various cancer centers.

And covering the cancer center directors, their deputies, the committees, the various department heads. This is a whole -- there's an art to this, and it requires an investment, one that we have made. The Precision Oncology Alliance, which is really the only collaboration like it in precision oncology, I would argue precision medicine as well. We're at 100 institutions. We feel there's more that we can do with these sites. So we're very eager to take this to the next level. It's dynamic. We have new people still joining, and this group represents about 4,000 oncologists and about 650,000 new cancer patients annually. So there's a power in this collaboration that the institutions are very excited about. And at the heart of it is their ability to use our data set and do research with us and to publish together.

So I'll turn this over to Milan. But basically, we're super excited about our technology leadership, our pipeline, which Milan will tell us about. The channel, I think, is very special. There are very few platforms that have all of these things. And finally, the financial profile that we have with a very, very strong top line growth, profitability as well, which puts us in a position. We announced a share repurchase this morning, which is not a super strategic thing, but it's certainly indicative of our ability, given our financial position and our profitability to continue to invest in the product pipeline, in the channel as well as get into the market and signal to the market our confidence level in the future for this company.

Thanks. Milan.

Great. Thank you, Brian. Thank you very much. If I had it my way, I give this presentation on the beach, but it's a pleasure to have you guys here today. And I'm excited to give a little fun updates on the Caris technology platform. So as many of you know, Caris is well known for being as comprehensive as possible with the sequencing. We've really standardized on this concept of looking at every single gene in the genome and the transcriptome since 2019, and we do it for 2 reasons: one, to leave no stone unturned to identify a drug or a clinical trial for a patient.

We know that many of the patients we serve are patients with late-stage disease who are looking for options for their care, and we want to make sure that they have the best shot for their treatment. But two, as Brian already alluded to, while our #1 goal is to help the patient up today, we can also use that data to help the patient up tomorrow. And we've amassed this huge data set that has been used extensively for academic research. We had 32 ASCO abstracts as many of you were there. We use it for our internal development and as well as in our partnership with pharma, and I'll touch on that. But building on our platform, while we've made our mainstay headway in therapy selection for late-stage disease on tissue, we built a platform to really cover the continuum of the entire disease course, building a liquid biopsy platform that covers therapy selection. We're currently validating as well for MRD.

As I'll touch on a little bit later, building a platform for early detection, being able to detect cancers at the earliest stages, while all the while continuing our strong position in doing a tissue-based sequencing for therapy selection with our FDA-approved MI Cancer Seek. So from a sequencing perspective, as my colleagues like to make fun of me, I always like to say, we always look at the entire kit and caboodle, every gene in the genome, both at the DNA and the RNA level, as I already mentioned. And when you are doing this comprehensive amount of sequencing, you really can pick up an entire litany of analytes in the tissue that are important for therapy selection. So things -- basic things like mutations, copy number fusions, but more complex things like multi-gene signatures that help us predict, for example, the tissue of origin where the cancer came from or help predict a chemotherapy outcome or immunotherapy outcome.

So we are the only test on the market that is FDA approved to do whole exome and transcriptome and we do this on every single patient, and it's part of our standard of care. And one of the cool things as well is that this large amount of data that we collect allows us to be really versatile. As I mentioned, new clinical trials, new biomarkers come out almost every single week. We have a whole team dedicated that updates our report on a weekly basis with the latest and greatest in evidence. And so when a patient is sequenced with Caris, we're not missing anything. If there's a drug out there, we're going to find it. And it's, again, part of our ethos and our approach to providing the best standard of care. In addition to that, we do -- as you guys are well aware, we have tons of FDA approvals coming out.

And so one of the parts of Caris standard of care is we have the lookback program so that when a new biomarker gets approved, we look back usually about a year, identify all the patients that were positive for that particular biomarker and then we contact the physician and let them know. That's not any extra cost, just part of our standard of care. We did this recently with a variety of the drugs that have been FDA approved like [ Opdivo ] and [indiscernible]. We'll do it for [indiscernible]. We'll do it for all these novel new agents as well. As I mentioned as well, having this comprehensive sequencing allows us to do much more intricate types of gene signatures. I'll touch on them in a couple of slides. But one piece I wanted to point out here on the right side was a paper we just published a few weeks ago on the importance of whole exome for TMB.

So some of you may be familiar with TMB, TMB stands for tumor mutational burden. As I used to explain to patients, it's a measure of how messed up the cancer is, how many mutations are in that cancer genome. And what we know is that cancers that have higher mutation burden begin to look more and more foreign to the immune system. However, we have this checkpoint called PD-L1 that acts like a camouflage that allows the tumor to evade the immune system. However, when we use drugs that block that camouflage, things like pembrolizumab, when these camouflages unmasked, these cancers that have a higher mutation burden that look more foreign actually are more responsive to immunotherapy.

And it's been known in the academic literature for a long time that whole exome sequencing is the best way to assess TMB and by definition, you're sequencing every gene in the genome that can make a mutated neoantigen that could be presented to the immune system. But what folks have done traditionally is they'll do gene panels and they'll estimate TMB based on a subset, so maybe on 300 genes or 700 genes or whatnot. What we show in this paper is not only the importance of the accuracy of TMB by doing whole exome, but actually showing that this accuracy leads to better outcomes. This is the first time it's ever been demonstrated that having whole exome-based TMB, when you compare it to panels, results in about 10% to 15% discordance and that discordance results in inferior outcomes compared to using whole exome sequencing.

So again, further refining this position and importance of doing this comprehensive sequencing. As mentioned, our whole exome transcriptome is FDA approved, the only FDA-approved whole exome and transcriptome on the market. And this doesn't really change our ethos. Our ethos has stayed the same, whether we're FDA approved or not. But what it does is it gives us the stamp of approval that the FDA has faith in our robustness, our sensitivity, our specificity in all our metrics. This is a massive submission, a fantastic work by the team who seek -- who achieved this FDA approval. It was approved for [indiscernible] indication across these various drugs you see here as well as a pan-cancer indication with MSI-high. Building on our legacy of whole exome transcriptome on tissue, we also do this on blood with our assay Caris Assure.

It's 2 assays in one. It's a whole exome and transcriptome on the plasma, looking at all tumor-derived DNA and RNA, but as well as on the buffy coat or the white blood cell layer to analyze for incidental germline mutations, meaning mutations that patients may be born with that predispose them to develop cancer as well as mutations from something called clonal hematopoiesis or CHIP. For those of you, I think most of you are going to be familiar with this, but you're not, you can impress your friends and neighbors later. So CHIP stands for clonal hematopoiesis of indeterminate potential. What these are, are naturally occurring mutations in our white blood cells that tend to increase with age, smoking and prior chemotherapy exposure.

And what we know is that many of these mutations occur in hotspots, certain hematopoietic hotspots, genes like JAK2, ASXL1 and others. What we know though is that a subset of them can occur in classical oncogenes, so genes like KRAS or TP53 or BRCA1 or BRCA2. And what happens is when these mutations occur in these oncogenes, they are a source of interference, meaning that if you couldn't differentiate between CHIP and a tumor-derived mutation, a doctor may make an inappropriate action based on a mutation that didn't actually come from the cancer, but came from the normal white blood cells. So we don't want to do that. That's not treating patients well. So the only way to definitively determine that is by sequencing the white blood cell layer directly.

So we published a paper last year in clinical cancer research that identified that 42% of patients have CHIP alterations. This is consistent with the literature. But what we see on this graph is on the X-axis is every gene we've seen a CHIP mutation in and Y-axis says, if we see mutation in this gene, how often is a CHIP origin. And these genes in light blue, genes like CHEK2, BRCA2, [indiscernible], NF1 and so on, are genes that if you didn't know is a CHIP origin, could lead you to either an inappropriate therapy association, diagnostic association or prognostic association. So as I used to tell oncology fellows in the clinic is you want to use liquid biopsies to identify markers to give an actual therapy. But what you don't want to do is give a patient a wrong drug based on, again, the mutation not coming from the cancer cell, but coming from the white blood cells.

Okay. As mentioned, we continue to also utilize this massive data set to develop really cutting-edge AI signatures. I'd like to tell people, Caris was doing AI before school, before ChatGPT wrote your kids essays. It's been in our DNA for a long time. And so we've always had a large staff of PhD level computational scientists and mathematicians at Caris. And a particular algorithm we've been very proud of that we first launched several years ago in our first version. We're now our third version called GPSai. And what this does is it takes that sequencing data and determines where the cancer came -- where -- what tissue did the cancer come from. It was originally developed for cancers of unknown primary.

So meaning you got a patient with cancer, but they don't know where it came from. It's a really scary diagnosis. Dr. [indiscernible] can tell you about this. Your doctor comes in the room and says, hey, you have cancer, it looks bad and we don't know where it's from. And that's a problem because if you don't know where it's from, the diagnosis is the foundation of all cancer treatment. It dictates everything that's done after that, every treatment that's done after the diagnosis. So not having a good diagnosis is scary.

But what we've also come to realize is this test has actually been equally helpful in identifying misdiagnosed cases. So every day at Caris, we sequence roughly 700 cases and about 1 to 5 or so come in where the algorithm says it's a different diagnosis on the path report. And so when we get that discrepancy, our pathologists will do the additional workup to get to a better diagnosis. This is a very robust assay. It was trained on almost 200 -- somewhere in the upper 200,000 cases. It is 84% accuracy for CUP and 95% accuracy across over 90 tumor types.

We've also -- due to time, I can't go through all this, but we also developed additional algorithms for chemotherapy benefit for a variety of IO therapy benefit as well across a variety of different tumor types. So given some updates on pipeline. So an area that many of you are well aware that Caris is very excited about is for early detection. We developed a test called Caris Detect based on whole genome sequencing, a high-depth whole genome for the early detection of cancer. And the really advantageous approach of taking whole genome sequencing is that detecting cancer is a shots on goal problem. You've got a very small number of cancer molecules in a large pool of normal. And so taking as many shots on goal to detect the cancer signal gives you the best chance at optimal sensitivity and specificity.

And so we have found whole genome sequencing to provide really significant advantages there. We have press released and presented on our earnings call, our first case control data, we call it Achieve-1 on 3,000 individuals, so 1,000 cancers and 2,000 normals and achieved a Stage I/II sensitivity of 60.3%, while maintaining a specificity of 99.2%. As you can tell, and many of you who are already familiar with the space, there's considerably better Stage I/II sensitivity than what you're currently seeing on the market. I want to point out cancers like breast and prostate performing quite well. And obviously, the importance of detection is you got to detect it early for these tests to be beneficial, and we are very supportive of this.

We're continuing to generate additional data. We have a second cohort of 25,000 individuals that's currently accruing, and there will be more to come in this space. Also, just a few weeks ago, we launched Caris ChromoSeq. This is a whole genome test for hematological malignancies, initially launched for AML, MDS and MPN, originally published in the New England Journal of Medicine in 2021 by WashU, where we licensed it and then further improved upon this test and now have launched it. It's been a phenomenal test, 7-day turnaround time being able to pick up every variant needed for the appropriate diagnosis and treatment of hematological malignancies. It replaces the need for multiple smaller tests that are currently being done for hematological patients into one test.

Feedback has been overwhelmingly positive on the ease, turnaround time and the amount of comprehensive information that this test is giving patients -- giving oncologists who treat heme cancers. And then we continue to work additional parts of our pipeline. We launched MI Clarity also a few weeks ago, which is our test for breast cancer recurrence. Think of it as a replacement for Oncotype, does a fantastic job in detecting early recurrence in the first 5 years, but this a really, really -- it really differentiates in the late recurrence, being able to detect which patients are at high risk of relapse in 5 to 15 years out from initial diagnosis. So this is a digital path predictor, no sequencing here. It's an AI on H&E image turns around very quickly. It turns around in a day and providing really robust information.

We're also in the development of our MRD approach, both a tumor-naive approach using our whole exome and transcriptome liquid biopsy as well as a whole genome-based tumor-informed approach. Moving on to pharma. Pharma has 3 major pillars in how we support pharma core biopharma services, which is traditional profiling of samples from pharma, whether on clinical trials or correlative analyses as well as being able to support CDx engagements and identify patients who are positive for particular biomarkers for the clinical trials. We have a strategic data pillar. We've -- as Brian mentioned, amassed now over 1 million patients sequenced with a majority having whole exome transcriptome with clinical outcomes, and this is obviously really powerful from research. And then Caris Discovery, which is our division of Caris that's focused on utilizing our data, tissue and proprietary proteomics technologies to identify novel drug targets.

Caris Discovery had fantastic news at the end of last year with Genentech, actually to announce our largest pharma deal today, being able to partner with Genentech to identify novel drug targets for refractory cancers. I always like to point out that Genentech folks have been absolutely joy to work with. Their scientists are phenomenal. Our groups work very closely together, advancing the science here, utilizing our technologies to identify these novel drug targets. So with that, I'll hand it off to my esteemed colleague, Mr. Power.

Thanks, Milan. I'll go through this relatively quickly. All the numbers here have been disclosed publicly. So I think everyone is aware of these. But we continue to have strong revenue performance. Obviously, in Q1, with the 79% growth primarily coming from the molecular profiling business, which is kind of our key unit. We've always been clinically focused. So the pharma portion of our business is continuing to grow from a smaller starting point. But when you look at molecular profiling, the kind of key thing that you have to focus on is there's 2 parts of the equation. There's the P x V. So from a pricing standpoint, from an ASP standpoint, what we've been able to do over the last year was demonstrate kind of this long-term approach that we take with our technology and having the reimbursement catch up.

So historically, Caris has always kind of put the assay first and then sought reimbursement for that after the fact. So again, it's the right thing to do for the patient. So years ago, we went to a 500-gene panel before anyone else was doing even 100 genes. And then we did the exact same thing with whole exome and whole transcriptome. And the reimbursement catches up because the clinical utility is there. And obviously, it's the right thing to do. So from a revenue standpoint, we continue to demonstrate very strong performance since we IPO-ed last year. With overall financial performance as well, because of the reimbursement uplift and because of the focus on technology, we're also demonstrating really good operating leverage. And you can see that throughout the P&L for us, where we have a gross margin in the 65% range.

Again, this is while you're doing whole exome and whole transcriptome, which is not the cheapest thing to do. But again, it's the right thing to do for the patient and also having positive adjusted EBITDA and positive free cash flow. So since we've IPO-ed, we've obviously had positive free cash flow for each of the 4 quarters. And what we're going to do this year and what we've communicated previously is we're going to utilize that positive free cash flow and reinvest it in the business. And that's kind of the attitude for this year is the reinvestment attitude. Last year, it was just demonstrating the profitability. We wanted to go IPO.

We wanted to demonstrate the financial strength of the company. And now we're going to reinvest it. And obviously, we announced the share repurchase this morning, just showing how strong we are from an operating leverage standpoint. As you go into the molecular profiling business unit itself, there's 2 components to that. There's obviously the tissue components, which we've been very strong in. It's our legacy product, but also the blood component, which is kind of newer market for us, and we've been going for about 2 years now. We continue to see like great penetration in liquid, obviously, in the kind of high 50% growth range in Q1. It's a smaller N from a starting standpoint, but we continue to see great, great penetration there.

From a tissue standpoint, it's our legacy product. We definitely think there's opportunities to continue to expand that growth, and that's kind of where the focus of our investment is this year from a molecular profiling standpoint. Brian touched on this earlier. One of the key things we're investing in is the sales force because, obviously, with our financial profile, the return on investment is obviously a lot differentiated than what others are doing out there. So we're going to continue to expand that with the goal of getting to 300 salespeople, hopefully, by the end of Q2, continuing to expand the territories. We went to 146. I think the next step for us is to get that to 175 and continue to get penetration across the broader network itself. We continue to focus on, obviously, EHR integrations. We're in a great space and a place where 70% of our orders are coming in electronically. So we continue to make the investment there on that side of the team.

From an overall P&L standpoint, the key items I'll point out on this are obviously the adjusted EBITDA and the free cash flow. That's very unique given our scale and how long we've been around. It's not the first time we've actually achieved this. Like back in 2018, we also achieved positive free cash flow, but we decided to do the reinvestment and the reinvestment in the sales force. And obviously, that paid off with the technology focus of going to whole exome and whole transcriptome. And then from a performance standpoint, obviously, one of the key things from the equation standpoint is the ASP. Our MI Cancer Seek, the FDA-approved tissue assay is priced at $8,455 on the clinical lab fee schedule. We feel very good about that pricing. Our Caris Assure assay is priced at $3,649. One of the key things that we're going to focus on over the next kind of 1 to 2 years is kind of taking the same approach that we took with tissue and applying it to liquid.

So what does that mean? It means actually taking our liquid assay through New York State approval, which we obviously publicly announced, we've submitted that, and we're waiting on it. And then we're taking that assay to the FDA. And once we get to the FDA approval, then pursue an ADLT path with improved pricing. So somewhat similar to what we did with tissue. But for tissue, our pricing is based on CDLT. It's not ADLT. There's a little confusion out there in the market on that. So we feel very good about the price stability around our ASPs over the coming years. From a tailwind standpoint, obviously, MI Cancer Seek continues to perform very well, being the only FDA-approved whole exome whole transcriptome assay out there. But Caris Assure is continuing to excel as well because of the unique approach we're taking.

So we definitely think the gross margin is in a good space right now. One of the unique things about us as a company is we're never kind of focusing on kind of the individual gross margin levels. Like what we want to do is focus on the technology. We never go in developing a technology to hit a certain gross margin. You want to get the best data and the best test out there, and then you actually operationalize and kind of fine-tune it after the fact. So it's the same thing that we're taking with the Caris Detect. Like whole genome is not a cheap test to do, but it will get you the best performance. So that always has to be your primary focus anytime it's customer-focused or patient focused. And then from a guidance standpoint, we kind of maintained our guide based on the Q1 call. We feel very good about that today. One of the key things that we've pointed out is this is just based on the existing products that are out there at the end of Q1.

Obviously, we've launched MI Clarity. We've launched ChromoSeq, and we're also planning on launching Detect. And we'll add these to the guide once they have actually had a quarter or 2 to mature and then continue to update the Street from there. And then I'll stop there for questions.

Great. So I think if you guys could kind of walk through the share buyback that you announced this morning, sort of what was the strategy? And then any other updates on kind of how you're thinking about capital allocation?

Yes. Listen, I don't think it was anything other than a view that we have the capability. We have the profitability that Luke was talking about, and we have the ability to continue to invest in both the product pipeline, [ MCED ] launch, channel strengthening, et cetera, et cetera. So we have the freeboard. And given where the stock is, why not use it. I think it's also a reflection of our CEO and founder's confidence about this market and the company overall.

Great. And then you mentioned the Detect launch earlier in the presentation. I guess maybe talk through what else you kind of need to see in order to launch that test, how you're thinking about timing? And then also just how you're thinking about that market developing over time, and you'll be launching as a self-pay kind of partnered with Everlywell, but any sort of updates there?

Yes. So we publicly announced that we're going to do the first launch with Everlywell, that online platform. I think what we're working through right now is just making sure that customer experience is kind of excelling end-to-end. So the focus on the IT systems, what the follow-ups are. We're in a unique position because of our history that it's not just -- we don't want to give just a result test. And then if it's a, yes, good look, no, you're good. Like we want to help the patient after the fact, too, after the result. So what we're doing now is kind of finalizing all those processes and what's the next step.

So with the goal, obviously, we've communicated before in the first half of this year. So we're coming up on that. But again, the focus for us is always on the customer experience. So we want to make sure that's right.

From a next step standpoint, then it's like, okay, getting that online platform up and running, seeing what the initial uptick is and then expanding partnerships. For us, we've kind of shown the financial discipline as a company over the last kind of couple of years, and we want to continue that with detection, too. So we're not going to hire a 300-person sales force, go [ PCP ] or anything like that.

We're going to utilize the partnerships that are already out there because the health care space in itself, especially from people looking after their own health is changing. Like people are taking care of themselves more. They're doing a lot more online. So I think that's going to be the focus for us from a detect launch standpoint.

Great. And then I guess in the last 30 seconds, what do you feel is sort of the most underappreciated part of the Caris story? And what are you most excited about as you move throughout the next year?

I think the underappreciation is, obviously, we've shown the profitability. That's very unique in our space, but also the technology, like there's no one else doing whole exome whole transcriptome at the scale that we're doing it. And obviously, now expanding into whole genome for detect. I think that's very unique. It's not an easy thing to do. People think they can get a kit and they can run it. It's not. Like it takes a lot of years' experience to do it. And I think the technology component is kind of lost a little bit, but...

Awesome. Great. We'll end it there. Thank you so much...

Thank you.

Thanks, Evie.

Hi, everyone. Welcome to the Bank of America Conference. I'm Avanti Kataria from the Life Science Tools and Diagnostics team. With us, we have Milan Radovich, the CSO; Brian Brille, Vice Chairman; Bobby Hill, Senior Vice President and CCO; and then finally, Luke Power, CFO from Caris. They recently IPO-ed less than a year ago, and we'll have a presentation. If you have any questions towards the last 2 minutes, please raise your hand. We'll be happy to take them. Thank you for being here.

Great. Well, thank you. This is our first conference here actually after many being public with our IPO last June. So it's a pleasure to be here. And I think my main point that I'd like to just start out with is although we've been at this since 2008 with our company, we're looking at opportunities in the marketplace that we think are more remarkable facing our platform than we've ever seen.

We've been building this business since 2008. We got a very early look at multiomics with the Molecular Profile Institute. We launched, as you know, Whole Exome, Whole Transcriptome, 23,000 genes well in advance of anybody in the marketplace, and that has really helped define us and has put us in a position here to benefit, we think, from all of these amazing trends in precision medicine, precision oncology and in particular, cancer genomics.

We've been building this platform for many years. We think it's defined in large part by our technology the 23,000 genes is not a reflex or part of the menu, but every single patient has gotten this for many, many years. So we're scaled up now. We're annualizing at over 200,000 profiles on an annual basis. So we have scale. We have broad reach.

We're reaching now over 6,100 oncologists in the United States. Every time we profile a patient, the amazing thing about our business model, that goes into our data set, which is one of the largest. I think Milan is the largest transcriptome set actually in the world. So over 1 million genomic profiles, most of which now are matched with clinical outcomes. And that powers us.

It powers our R&D internally, and it makes us extremely attractive to our partners, both academic medical center partners, which are also clinical partners for us, but also in the biopharma community as well. The data set continues to grow. It's a very important part of our business, as I mentioned in many respects and grows every time we profile patients.

The trends here, we got a lot of questions around is the space getting crowded. What's the penetration rate, et cetera, et cetera. And I would say I'm in the market very frequently with cancer center directors with KOLs, et cetera. And I don't -- I think we see as many opportunities today, if not more, than in the 8 years that I've been at this company. So the TAM is large. It's growing.

There are a number of names in the space, but nevertheless, the penetration rate against the therapy selection TAM alone is only about 35% penetrated and the penetration rates of course, in some of the new exciting modalities like MRD are extremely small. That business is really just beginning.

Molecular profiling has emerged as the standard of care. So that's the good news. But there's a lot more work to be done in getting every patient profiled from the cancer center leadership perspective, getting them profiled consistently and systematically. It's hard to run these organizations. So getting all of the different oncologists to behave in the same manner and apply a precision oncology program in a thoughtful way is part of their challenge.

So platforms like ours, and I think, in particular, our platform is very well suited to help them from various departments, and these are complicated organizations to get patients profiled properly, early and with the best technology. And we have a whole organization, a whole channel that Bobby runs that is set up to do this with senior people who cover the cancer center leadership as well as the salespeople who cover the individual oncologists, a team of 50 PhDs and molecular medicine MSLs who help with the interpretation and support the oncologists in finding the right clinical protocols, trial, eligibility, et cetera.

So this revolution in molecular medicine is really just beginning and all of the hard work that we and others have done over the past number of years is really, I think, setting us up over the next 5 to 10 years for just a remarkable time, a remarkable time of introducing new modalities and creating an environment where molecular information is delivered in a strategic way across the cancer centers at the individual oncology level as well as at the institutional level.

The cancer centers are moving towards institutional decisions as a result of this, not just allowing the individual oncologists to do whatever he or she happens to want to do, including not profiling in some cases, there's still some amazing situations that you hear about where patients aren't getting profiled at all. So all of this is really an opportunity for us to deliver the capabilities in a partnership sort of way.

So these trends, I think, have -- are ones that we've thought about for many years. And we've set up our channel, our commercial channel and our research channel to take advantage of these trends, but also serve our client base in as effective way as we possibly can. So starting with our philosophy, which is patient first. And I'd say, interestingly, our move to Whole Exome Whole Transcriptome wasn't a result of a decision around a particular economic or market opportunity, but really was oriented around what's the best thing for the patient and how can we help the treating oncologists give them the best tools to help the patients.

So everything we do is oriented around a patient-first philosophy. We have been investing in our platform. We think our platform is highly differentiated, very effective, et cetera. We went through a period of time, frankly, where we were capital constrained prior to the IPO. So coming out of that, we are engaging in a very deliberate investment program that's being led by Bobby, who's been in the seat now, the CCO, the Chief Commercial Officer seat for a couple of quarters. So he's bringing new leadership, new energy, new tactics, many things that I think are going to be fabulous actually for us and for the cancer centers.

And we're also complementing that with an investment program to increase the headcount, the FTEs, increasing the number of territories as well as building some new and strengthening some other specialized product-oriented sales forces. So we think there's a tremendous amount of upside, and Luke will talk about this in terms of our case volume growth beyond what we've put up for the last couple of quarters, and we're very excited about that.

We cover not only the individual docs, as I mentioned, but also the senior leadership at these cancer centers. We think we do this in a unique way in part through the Precision Oncology Alliance, which is dynamic. It's growing. It's now at 100 sites. So we added UC San Francisco, an NCI site, obviously, in San Francisco, a very important one that got us to 100. So this is a very important collaboration around research and data, it's something that they love. They view it as their own. And they have the opportunity at its core to get access to our data set for their own research, research with us, et cetera. So it's extremely dynamic.

This is a force actually with 100 members now. And when I joined the company 8 years ago, we had 19 sites, right? There were a couple of other collaborations like this that were similar size and those no longer exist. [ Auris ] has sort of emerged as the leading collaboration in precision oncology. And I would also argue maybe even more broadly in precision medicine, and we're seeing opportunities to extend into the other disease states as well. That represents of the 10,000 medical oncologists in the United States, it represents about 4,000 of those oncologists. So it's a pretty substantial part of the overall market, in its own right.

So maybe just summarizing, and I'll turn it over to Milan. We go to market in a way we think we're highly differentiated from a technology perspective. That's true for our existing therapy selection products. We just launched this last month, a very exciting whole genome platform in hematological cancers called ChromoSeq. We also launched a dig path technology called MI Clarity for chemo predictor in breast cancer. So we're very excited about those in terms of completing the continuum of care, but also continuing to enhance our relevance and importance at our cancer center partners.

The financial profile, which Luke Power will talk about is we put up 79% growth last quarter year-over-year in revenues, 85% in molecular profiling and think that the fact that we're profitable and have been for the past 4 quarters, profitable, free cash flowing, our balance sheet cash on hand is growing. This gives us huge strategic flexibility to do a number of things from our product pipeline, which is so exciting in the MCED and MRD area.

So with that, Milan.

All right. Thank you, Brian, for the great introduction. So a pleasure to meet you guys, Milan Radovich, Chief Scientific Officer. And what I'm going to do today is walk you through our technology platform and then talk a little bit about biopharma.

So as Brian already alluded to, Caris has really prided itself on always being as comprehensive as possible. We standardized on Whole Exome and Transcriptome sequencing in 2019. We have the only FDA-approved Whole Exome Transcriptome on the market. And we do this type of comprehensive sequencing, looking at every single gene in the genome, both at our tissue but also in blood.

We do this for 2 reasons. One, we want to leave no stone unturned to identify a drug or a clinical trial for a patient. Prior to coming to Caris, I was in the clinic for many years, and I used to explain Caris testing to patients as you're about to get the Star Trek of technology. And if there's a drug or a clinical trial out there, we're going to find it. And we want to be able to give our patients every shot on goals as possible to figure out a vulnerability in their cancer that we can treat.

But secondly, and as I'll touch on later, while our #1 goal is always the patient of today, we also know that this data can be used to help the patient of tomorrow. And we use our data vastly for research with the Precision Oncology Alliance, as Brian mentioned, with pharma and also for internal development.

With Caris Assure, we are really excited by this platform. It's really a revolutionary product on the market to look at the entire exome and transcriptome in the blood and be able to apply that across the care continuum, currently launched for therapy selection, but we have significant efforts in developing this for monitoring. We have efforts in MRD. And then as I'll touch on later slides, with Caris Detect, a whole genome platform for early detection.

So when it comes to our comprehensive molecular profiling, I won't dive through all the details here. But I think really, again, the high-level point is that when you go comprehensive, when you go broad, you can capture the litany of every potential analyte you can think of from a sequencing platform, things that are basic like mutations and copy number infusions, but things that are much more complex, things like AI signatures and others that allow us to, again, give patients every shot possible, giving them a complete answer for the treatment of their cancer.

Now one thing about this comprehensiveness is that it gives us a lot of versatility as you can imagine, with its application for clinical care. One of the things that I love about the versatility is that when a new biomarker or a new clinical trial comes out, we don't have to redevelop our panel. We don't have to add a different gene, go through CAP/CLIA validation, so on and so forth.

We already capture it. So what's really cool at Caris is that we have an evidence team who all they do every day is actually monitor literature and abstracts and so on for the latest and evidence in NCCN guidelines. And that when a new drug is approved, our team will actually go back usually a year, identify every patient who was positive for that biomarker and then we contact the physician to let them know, say, "hey, your drug -- your patient is positive now." This drug is recommended. We don't do that at any charge. That's just part of our standard of care of what we do at Caris.

Also by having this comprehensive sequencing, we're able to use really cool AI signatures that we develop. I'll dive deeper into GPS AI in later slides, but this is really important because when you are analyzing 23,000 genes across many, many, many hundreds of thousands of patients with a variety of different clinical outcomes, frankly, the human mind cannot actually hypothesize or determine what is the pattern that could help determine, let's say, a responder from a nonresponder or be able to predict prognosis. You really need powerful AI tools. And AI, while it's such a buzz term today, it's been in our DNA for many, many years. And so one thing I always like to say is that Caris was doing AI before ChatGPT wrote your kids assays. I mean we've been doing it for a long, long time for many years.

We have, I forget now, almost 80-plus PhD level data scientists at Caris for mathematicians, computer scientists who are really mining our data on a daily basis to really come out with the best endpoints. One of the things that was really cool, I'm biased as the first author, but this paper published yesterday, where we actually showed that TMB, so TMB stands for tumor mutation burden.

If you guys are not familiar with what TMB is, TMB is how heavily mutated a cancer is. When a cancer is more heavily mutated, it looks more foreign to the immune system. And it's more foreign to the immune system, the immune checkpoint inhibitors work better. So when you block a target called PD-L1, these cancers tend to be more uncovered to the immune system and they tend to attack it better.

Well, TMB is calculated by counting all the mutations. And what a lot of people have tried to do is they'll use small gene panels like 300 genes or 600 genes or whatnot and estimate what the total mutation burden is from just a small sliver of the total gene pool. We at Caris measure all of it. So by definition, our estimate is more accurate and the academic literature suggests that as well.

Well, what we showed yesterday was for the first time, not only is it more accurate, but it actually does a better job of predicting outcomes to immunotherapy. It's the first paper ever to demonstrate that TMB by whole exome results in improved outcomes, not just better assessment, but improved outcomes. So we're really excited. This paper just published yesterday, and we're excited to be talking more about it today.

As I mentioned, with our Whole Exome Transcriptome, it is the only FDA-approved Whole Exome Assay and Transcriptome assay on the market, FDA approved with 8 CDx indications across 20 therapies. What does this mean? Does this mean that Caris does a better job taking care of patients after FDA approval than before it did? No. What it does is it gives a sample of approval that the quality of our test and its reproducibility and its sensitivity and specificity meets the bar of the FDA and that when people getting a Caris test, they have reliable results. And kudos to Dr. Oberley, who's our Chief Clinical Officer, he helped lead a lot of initiatives. It was a 15,000-page submission took a massive amount of effort, but really a testament to the work that we do at Caris.

So building on our legacy in tissue, we launched now a couple of years ago, Caris Assure, which is also a whole exome and transcriptome, but this time on blood. And as many of you know, liquid biopsy has really revolutionized our capabilities to do molecular profiling in a very noninvasive method. As I tell patients, there's not a line of people outside the radiology suite to get a tissue biopsy. It's not really fun. I'm telling you right now, it's not fun.

But a liquid biopsy is easy. It's a blood draw that you can do in clinic. And what we've learned is that we can really amass a huge amount of information with using these really sensitive next-generation sequencing techniques. And what's really cool is that the way that we can see these technologies applied is that these platforms are really complementary. They don't replace each other. They're complementary. So every patient is going to get a tissue. You can't have a cancer diagnosis without tissue.

Tissue remains the gold standard. It's the most sensitive allows us to do not only sequencing, but other types of tests like immunohistochemistry for guiding therapy. But what we know is that cancer evolves and getting a blood-based biopsy gives us additional information on the molecular makeup of the cancer. So these are really powerful when used together, and Luke can talk more. We're seeing a lot of docs use these tests in a combined fashion and also to monitor patients while on therapy.

One of the important things about what we do at Caris, this is going to be a surprise to some of you, but we sequenced the plasma to look at tumor-derived DNA and RNA, but we also sequence the white blood cell layer or the buffycoat to look for germline mutations, meaning mutations you were born with that predispose you to cancer, but also to determine definitively these mutations called clonal hematopoiesis or sometimes called CHIP.

So you can amaze your neighbors when you learn -- if you learn something new today. So CHIP are mutations that are naturally occurring that tend to increase with age, smoking and prior chemotherapy exposure. So a guy like me has more CHIP than a young guy like Kyle right here. But what these are is these mutations, they're naturally occurring. And what happens is sometimes they actually occur in cancer genes that make it look like that mutation came from the cancer, but it actually didn't. It came from our white blood cells. And what that does is it causes interference in our interpretation of these liquid biopsies.

So Caris is the only test on the market that actually definitively determines these mutations and effectively subtracts them, so that our oncologists are not making incorrect decisions based on mutations that don't actually come from the cancer that actually come from these naturally occurring mutations.

I'll end off here on the pipeline with GPS AI. Actually, this is also an algorithm led by Dr. Oberley, who's here in the audience. And this was an AI algorithm that we run on our tissue test that determines the tissue of origin. So it was originally designed to help with cancers of unknown primary. So this is when a patient is diagnosed with cancer, they don't know where it comes from. I will tell you, it's actually one of the most scary situations for a patient. Your doctor comes in the room says you have a terrible cancer. And by the way, we don't know what it is, and we don't know how to treat it. It's extremely scary.

And having GPS AI has been phenomenal. It's highly accurate for 90 tumor types, highly sensitive. But where we also found it to be really helpful is not just in diagnosing cancers of unknown primary, but every day, we get about 1 to 5 cases where the AI algorithm actually says it's a different diagnosis than what comes in on the pathology report, meaning we're finding misdiagnosed cases. And that's also equally important because the basis -- the fundamental basis of all cancer therapy is based on what type of cancer it is.

And so Matt and his team do a wonderful job of calling physicians, doing the additional work and every day are overturning diagnosis, so that patients are always getting the right diagnosis. This is just part of our standard of care at Caris.

So moving on with the pipeline. As many of you know, we've been really excited by our early detection results. You just need to read Alex Dickinson's post on LinkedIn. He's very excited. But as you know, we are really pioneering our work in early detection, applying a whole genome approach to be able to take as many shots on goal to be able to detect the cancer signal.

Our early results with ACHIEVE 1, which is a roughly 3,000 patient case control cohort demonstrating fantastic 60.3% Stage I/II sensitivity while maintaining really high specificity. And this is really important because if you're going to have an early detection test, your test has to catch up early. And I think for us, that's the bar. And we're really applying, again, the most cutting-edge genomics approaches, but also AI approaches to be able to detect cancers at early stages.

As you may be aware, there's others in the space who have been having real difficulty with things like breast and prostate cancer early stages. As you can see from the data below, our results are showing to be considerably better than what you're currently seeing out on the market. We also launched recently Caris ChromoSeq. This is our first whole genome assay for therapy selection for hematological tumors. It's launched for AML, MDS and MPN, originally developed at Washington University, but we licensed it and then further improved upon it and really allowing us to fill a gap in our sequencing to be able to be comprehensive as possible at cancer centers being able to service both their solid tumors and their heme malignancies.

I'd also like to point out, obviously, thankfully, relatively uncommon, but as you guys know, with pediatric cancers tend to have more hematological malignancies being able to service our pediatric populations much better now that we have this whole genome test. We're developing a variety of tests that cover our entire pipeline, as I referenced below -- I'm sorry, referenced previously, Caris ChromoSeq. MI Clarity, as Brian mentioned, is actually a digital path AI algorithm determining breast cancer recurrence.

I think of it as dig path alternative to Oncotype and to MammaPrint. As you know, this is a very large population, and it's actually a large population that doesn't get sequenced because chemo endocrine therapy is standard of care, and this really enables us to have access to a large population with this cutting-edge molecular profiling. And then we're also building out MRD solutions, both tumor-naive and tumor informed.

I'll end here with biopharma, which I also oversee. And in biopharma, we have 3 major pillars. We have our core biopharma services, which is our molecular profiling of clinical trials and big tissues and joint research we do with pharma. We have our strategic data. We have amassed the largest data set in cancer, Whole Exome and Transcriptome. And this is obviously valuable to pharma for their development and have a lot of active deals and a lot of partnerships in the pipeline.

And then we have Caris Discovery, which is our division of Caris that's dedicated to using our data, our tissue and some proprietary proteomics technologies for the identification of novel drug targets. Just an example, very recently, our largest deal, actually, a pharma deal in our company's history with Genentech in December, which is for Caris Discovery, which is a partnership to identify novel drug targets in refractory tumors with a significant upfront and milestone.

And I will tell you the Genentech scientists have been an absolute joy to work with. It's a scientific nerdfest between us, and to be honest with you. I'm actually going to be there on Friday again for yet another one. So we have a great relationship, and we hope to really change the face of cancer with this relationship.

So with that, I'm going to hand it off to someone smarter, Mr. Power.

Definitely not smarter and the reason why I go last. So from a performance update, obviously, we publicly disclosed our Q1 results last week, and it was another very strong quarter for us. So from an operating standpoint, we have great operating leverage right now. So our revenue for the quarter obviously grew 79%, with molecular profiling leading the way with blood and tissue boat above 80%.

And again, that's driven by 2 key factors. Obviously, for us in the molecular profiling space, there's going to be a P times V, so the price and the volume. Our volume -- our growth grew 15% year-over-year as we're working through kind of ramping up that sales force, but our ASP also grew 61%. And it's that leverage, the combination of those 2 things in the equation is driving that great growth that we've seen since we've been a public company.

And obviously, that's translating to the bottom line, too. We're very unique in that, we've been now for the last 4 quarters, free cash flow positive. And what we're doing with that free cash flow is, obviously, we're reinvesting in the business. Milan went through the pipeline, and that's something that we're going to push hard on very this year with detection being kind of the primary focus over the next couple of months along with MRD and obviously scaling up MI Clarity and ChromoSeq and then continuing to work on our MRD platform.

So from an additional operating highlight standpoint, obviously, we reported at the ACHIEVE 1 study that Milan went through. But as Brian touched on, because of our unique financial position, we're also able to refinance our debt and get a lower interest rate, which again is positive from an EPS standpoint, but it also allows us to have additional strategic capital in order to exercise on our kind of initiatives for this year.

So from a Caris standpoint, we've always been clinically focused. That's why the majority of our revenue has been driven by the molecular profiling unit. Now what we're doing this year is we're expanding both units. So our molecular profiling sales team led by Bobby is going to be increasing by 25% to 30%. And it's the same with our pharma team. And again, it's because of the operating leverage that we have, because of the decisions we made years ago to go to Whole Exome and Whole Transcriptome and get and seek a higher reimbursement for that because it is the broadest test out there. It allows us from this financial position of strength to execute throughout the year and continue to drive the top line.

So again, moving to the kind of the clinical volume, so part of the equation, the V of the equation. Obviously, the 15% was still very profitable growth for us. I think what we wanted to execute on this quarter, we did from a realignment of the sales force that was disruptive in January, but we felt very good coming out of that and how we set up for the rest of the year.

The other key thing from a Q1 standpoint, obviously, we've been primarily focused on tissue for many, many years. Like we're one of the leaders in the space from a tissue standpoint, but we're also continuing to gain penetration within the blood market. So our Caris Assure volume grew 58% in the quarter. Again, it's a smaller end that's starting from, but it's continuing to show the penetration that we're getting from having a unique assay in the field, obviously, doing Whole Exome, Whole Transcriptome and CHIP.

Again, we have 270 folks at the end of Q1 on the way to 300, and we'll continue to assess that as we expand throughout the year because, again, the financial profile of the company allows us to do that and the growth that we get from additional salespeople is obviously a very high ROI right now. So from a financial overview standpoint, obviously, a lot of people in the space have about like mid-60s gross margin. It gets a little lost sometimes.

We managed to achieve that by doing the broadest panel possible, doing Whole Exome and Whole Transcriptome. So we don't have to go and continue to add to our assay. So many people, obviously, you start with lower genes, you'll continue to see that expand. We decided years ago based on David Halbert's vision is to go as broad as possible, so we can future-proof our assay. Now what that allows us to do from a financial performance standpoint, it allows us then to continue to get efficient with that.

So as sequencing improves, as the cost of sequencing comes down, you will see based on us pursuing reimbursement, our COGS are going to continue to come down based on the advances you're going to see over the next coming years. And again, that all flows down to the bottom line, which is the whole purpose of this strategy is this continual flywheel of more and more data coming in, sequencing costs coming down, it will allow us to continue to generate like a solid bottom line going forward. And we're not just chasing profitability. We've already achieved it.

So molecular profiling services performance. One of the key things for us for the last 4 quarters is, obviously, we've over excelled from an ASP standpoint. So our molecular profiling for tissue was just under $4,100 for Q1. And then our Caris Assure assay was just under 4000 -- sorry, $2,421 for Q1.

From a reimbursement standpoint, one of the key things that gets lost is these are not ADLT tests, they're CDLT tests, which is different. So the pricing structure and what we actually do is more stable over a longer period of time based on PAMA reporting.

So from a tailwind standpoint, I'll start to wrap it up. We've done great over the last year with our payer contracting. Obviously, you can see it in the numbers, but especially with MI Cancer Seek, it's over 225 million covered lives, and that's within the space of 1 year. We're continuing to take that approach into Assure now. And that's kind of the next focus for our market access and our billing teams as we progress forward.

And then from a full year guidance standpoint, we reaffirmed our guide. We feel really good about that right now based on how we saw things coming out of Q1. And I think as we progress throughout the year, obviously, you're going to see MI Clarity, you're going to see ChromoSeq revenue, you're going to start to see detection launched, and that will continue to kind of compound on top of this initial guide, which does not include any of that, 2 seconds.

No questions.

Well, thank you all.

Good afternoon, everyone, and welcome to the Caris Life Sciences Q1 2026 Earnings Call. My name is Steven, and I will be your coordinator today. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand it over to Russ Denton at Caris. Please go ahead.

Thank you. Earlier today, Caris Life Sciences released financial results for the quarter ended March 31, 2026. Joining from Caris today are David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO.

Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our annual report on Form 10-K filed with the SEC. Except as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information discussed in this conference call is accurate only as of the live broadcast.

This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today. A copy of today's presentation materials can be found on our Investor Relations website.

I will now turn the call over to Brian.

Thanks, Russ, and thank you all for joining our first quarter 2026 earnings call. This is a strong start to the year, and we're pleased to report continued growth, profitability and cash generation, which will continue to support our investment strategy focused on MCED launch, the broader product pipeline and commercial platform expansion.

As illustrated on Slide 3, our platform continues to expand across technology, scale and commercial breadth. We're now supporting more than 6,100 ordering oncologists, with approximately 70% of orders coming through our EHR and portal channels. In the first quarter, we completed 52,800 cases, up 15% year-over-year. We're very excited about the initiatives that our CCO, Bobby Hill, is driving, and we began to see the benefits of these in February and March.

With this clinical activity, our data set has surpassed 1.07 million profiled cases, including more than 677,000 whole exomes, 728,000 whole transcriptomes and roughly 790,000 match profiles. We also reached another important milestone with the recent addition of the 100th Precision Oncology Alliance member, UC San Francisco.

We've launched 2 exciting products: Caris ChromoSeq and Caris MI Clarity. ChromoSeq is a therapy selection asset for hematological cancers, which expands the breadth of our offerings and features a cutting-edge whole genome technology. ChromoSeq was launched on April 1.

In addition, we launched Caris MI Clarity, an exciting prognostic test designed to deliver insight into both early and late distant recurrence risk for breast cancer by digital pathology.

And finally and importantly, we're making progress with Caris Detect multi-cancer early detection and we're getting ready for commercial launch with Everlywell with plans to add additional channel partners.

Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We had a strong first quarter with total revenues increasing 79% year-over-year to $216 million.

As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profile. Molecular profiling services revenues increased to $211 million in the first quarter, representing an increase of 85% year-over-year.

In summary, across the board, we had a very productive first quarter illustrated by the quarter highlights on Slide 5. This strong revenue performance, combined with the operating leverage inherent in our business model has produced continued positive financial results while we ramp up investments, including revenue growth of 79%, which was driven by volume growth of 15% and a 61% increase in clinical ASP. This revenue growth has led to improved gross margins of 65% on a GAAP basis, up from 47% in the first quarter last year.

We've invested significantly this quarter while maintaining financial discipline. This approach has produced positive adjusted EBITDA of $26 million as well as positive free cash flow of $22.5 million. This is our fourth straight quarter of positive adjusted EBITDA and positive free cash flow and provides us with valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels, such as MCED.

In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $825 million, an increase of $23.4 million in the quarter. Finally, as a result of this profitability profile, we are able to attractively refinance our credit facility. The new $400 million debt facility led by Blue Owl and Blackstone offers many advantages: lower costs, saving approximately $6 million in annual interest; an extension of maturity date, 3 years, from January 2028 to April 2031; and a committed delayed draw term loan of $300 million on the same terms for any potential strategic acquisition.

We believe that our financial performance gives us unique strategic flexibility which supported our investment program in the first quarter. We're continuing to invest in our product pipeline, importantly, in our MCED business, which Dr. Spetzler will describe in detail as well as the expansion plan for our sales organization. We believe that our commercial channel is highly differentiated and has many strategic edges. Bobby Hill is bringing enhanced discipline and alignment to the overall platform. We're committing new resources to expand the commercial footprint with important hires across the platform, expanding the number of territories covered and building product-focused sales teams.

As stated previously, our strategy is to maintain financial discipline through a strong balance sheet and profitability. These financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and support physicians.

I'll now turn the presentation over to Bobby to provide an update on our commercial business and related strategic initiatives. Bobby?

Thanks, Brian. I will provide a brief update on our molecular profiling business, along with our progress on the initiatives for the commercial teams in 2026.

On Slide 6, this shows our strong molecular profiling revenues performances for this quarter, with revenues increasing 85% to $211 million. This revenue growth was driven by a 15% year-over-year growth in clinical case volumes to approximately 52,800 profiles and a 61% increase in ASP and for our comprehensive profiling tests, reflecting our market access and billing teams' continued excellent execution.

We continue to see the benefits of ASP driven by our successful launch of MI Cancer Seek last year, and these benefits are reflected on the slide. Our tissue ASP increased by 70% to over $4,300 and our blood ASP increased by 14% to just under $2,500, driven by billing, our PLA code and improved payment for Caris Assure. Luke will discuss the breakdown of this further during the financial update.

Moving on to Slide 7, I'll spend a minute on the commercial changes we made at the beginning of the quarter and why we feel good about the trajectory coming out of the quarter. We completed the realignment of the sales teams in January 2026. That included expanding our territory structure from 82 to 146 territories and continuing to build out the field organization. We made those changes deliberately to improve coverage, sharpen accountability and create a stronger footprint for execution across both MI Cancer Seek and Caris Assure, along with setting us up well for product launches.

January was a transition month. As expected, given the scale of the realignment and expansion and following the realignment, activations in February and March grew approximately 20% year-over-year compared with the same 2 months period last year. And full quarter activations increased 17% year-over-year. That reinforces our confidence in the underlying demand trajectory, and based on the completion cadence in February and March, supports a quarterly exit run rate of roughly 56,000 completed cases.

For Q1 overall, we completed approximately 52,800 therapy selection cases, up 15% year-over-year, including approximately 43,600 tissue cases and approximately 9,200 Caris Assure cases. The key point is that demand accelerated as the quarter progressed due to the great work of the sales team, while completed case recognition reflected normal timing between activation and completion.

Beyond overall volume, the broader commercial engine continued to perform well. Caris Assure volume grew 58% year-over-year. More than 70% of orders were submitted electronically. Over 3,000 physicians are using EMR integrations. And we ended the quarter with more than 270 new commercial team members as we continue building towards our approximately 300-person goal.

So overall, we feel very good about how the team has performed with the initiatives. And I'll now turn it over to Dr. Spetzler to continue our progress on our product pipeline, in particular, around Caris Detect. Spetz?

Thanks, Bobby. I wanted to start with an important milestone for the quarter for Caris, which is the final readout for Achieve 1 for Caris Detect described on Slide 8.

At the high level, these data points serve as our clear validation of the clinical accuracy [ study ] and reinforce our conviction that our whole genome solutions -- whole genome sequencing approach to early detection is fundamentally differentiated. In the Achieve 1 data, Caris Detect delivered a 60.3% Stage 1 and Stage 2 sensitivity with a 99.2% asymptomatic specificity across 3,014 subject high-risk cohort. This is a meaningful result in early detection, particularly when you consider both the size of the evaluable cohorts and the complexity of the underlying biology we are trying to detect.

What gives us confidence in these results is not just the top line numbers, but the platform underneath them. Caris Detect is built on the foundation of Caris molecular profiling data, which now includes more than 1 million processed cases and over 50 billion molecular markers. That breadth and depth of data matters. It is what allows our AI models to identify difficult to detect biological signals associated with early-stage cancer with the level of resolution that we believe is differentiated in the field.

When you look at performance by stage, the pattern is exactly what you would see in a high-performing assay. Sensitivity increases consistently with stage: 56.8% in Stage 1, 67.7% in Stage 2, 79% in Stage 3 and 98.6% in Stage 4. We also reported 96% benign tumor and high-risk patient specificity alongside the 99.2% asymptomatic specificity results.

We split the population of patients without cancer into 2 different groups, because a false positive in a patient with a benign tumor or precancerous lesion should have a very different implication than a false positive in a healthy person. Taken together, those data show a strong balance between sensitivity and specificity across clinically relevant populations.

Importantly, the cancer type readouts were also encouraging. In the total Stage 1 and 2 data sets, we saw a sensitivity of 53.7% in breast, 74.1% in prostate, 73.4% in lung, 60.6% in uterus, 61.8% in bowel, 81.3% in head and neck, and 70% in pancreatic cancer.

And maybe the most important strategic point on this slide is that these results were generated using only 1 of 9 potential pillars. In other words, we believe there is still room to improve from here as additional pillars may further strengthen overall performance over time.

So when we look at Achieve 1, we do not just see a successful data readout; we see proof that the biological foundation is working and a platform that still has meaningful upside ahead of it. We have been doing a beta launch in the last few weeks and still anticipate commercial launch later in Q1 with Everlywell.

Moving to Slide 9, this also reflects the status of our robust pipeline. And I'll touch on these before letting Luke wrap up with the financials.

First, as Brian mentioned, Caris ChromoSeq is now launched for the MolDX coverage. This is the whole genome hem therapy selection solution designed for AML, MDS, MTN and suspected myeloid malignancies. The assay is differentiated by greater than 200x depth of coverage across the whole genome, the ability to detect the full range of clinically relevant genomic alterations and approximately 1.6 billion reads per patient.

Second, we have also launched the Digital AI only version of Caris MI Clarity. Caris MI Clarity is designed for both menopausal patients with HR-positive/HER2-negative node-negative early-stage breast cancer at the time of diagnosis. We see this as an important extension of our platform into recurrence risk assessment designed to support better decision-making and reduce unnecessary therapy.

Third, in MRD tumor-naive, we continue to focus on colorectal cancer. This solution uses the Caris Assure platform as tumor-naive by its design as it's intended to support minimal residual disease detection from the whole blood sample. We are currently compiling additional data for the MolDX technical assessment.

And fourth, in MRD tumor-informed, development and launch planning have made progress. This is a pan-tumor opportunity intended for Stage 1, 2 and 3 disease. It uses tumor-normal whole genome sequencing to identify trackers with a proprietary approach designed to minimize false negatives and maximize tracker count to achieve ultra-low sensitivity.

And finally, before wrapping up, I also want to provide an update on Caris Assure. We recently completed our submission to New York State, and we will provide an update to everyone once we hear back on that submission.

We had a very productive few months so far in 2026 with the newly launched solutions and are continuing to generate additional data and multiple avenues to extend the same molecular and AI foundation across therapy selection, risk recurrence, early detection and MRD.

With that, I will turn it over to Luke for the financial updates.

Thanks, David. Turning to Slide 10. We delivered another strong quarter financially with total revenue of $216 million, up 79% year-over-year. The main driver remains molecular profiling, which grew 85% versus Q1 of last year, and that was on continued ASP improvement and volume growth.

Therapy selection completed volume was up 15% in the quarter. And as Bobby discussed, we were very pleased with how we exited the quarter. While completed cases came in modestly below our initial expectations due to timing, as discussed, activations improved sequentially for the quarter for both tissue and blood following the January realignment. And that stronger case intake we saw exiting the quarter gives us great confidence in the Q2 and the balance of the year.

Turning to pharma and research revenue, this was $5.4 million versus Q1 2025 revenue of $6.8 million, and was due to the deliverable movement of our Discovery and data businesses under contract, which will flow through over the balance of the year and is supported by improved contract activity.

Overall, our revenue continued to translate into a strong bottom line with positive adjusted EBITDA and positive free cash flow for the fourth consecutive quarter, reflecting the disciplined approach we continue to take as we invest in the business.

As I stated on the last earnings call, we intend to utilize this financial strength to fund the pipeline and the commercial investments throughout 2026. And you can start to see that in the numbers. Operating expenses were $136 million in Q1, up from $132 million in Q4. Purchases of property and equipment were just over $10 million, up from $5.1 million in Q4. That is as we continue to prepare for pipeline launches, including early detection, while still delivering positive adjusted EBITDA of $26 million in the quarter upon the free cash flow of $23 million in the quarter, which also include our annual bonus payments of $30.5 million.

Turning to Slide 11. Q1 continued to validate the strength of our molecular profiling business with molecular profiling revenue being $211 million in the quarter, up 85% versus Q1 of last year. Reported revenue and ASP continued to benefit from favorable collections across both MI Profile and Caris Assure. And as the chart on the right shows, we have seen a meaningful buildup in the underlying revenue base over the last several quarters, with additional upside where collections have exceeded prior accrual assumptions as we continue to have collection success from the excellent work by billing and market access teams.

At the assay level, MI profile-based ASP was $4,091 in Q1 and Caris Assure base ASP was $4,421 showing the benefit from payer contract in progress and stronger collection experience.

With regards to our ASP, I also want to spend a minute on reimbursement framework because there has been a little confusion on this point recently. For us, both assays are CDLTs and not ADLTs. That means these are reported under PAMA, and the 2026 PAMA reporting window runs from May 1 through July 31, based on data from January 1 through June 30, 2025, with any related fee schedule update becoming effective January 1, 2027. As an update, we submitted our PAMA data on May 1 and do not expect any downward adjustments from that. We also continue to support the broader CRUSH efforts and do not view that as changing our underlying reimbursement position.

Turning to Slide 12, this highlights the key commercial and reimbursement tailwinds supporting the business in Q1, and that is demonstrated by our approach of always focusing on the technology first. Starting with MI Profile, we continue to benefit from MI Cancer Seek and the steady improvement we have seen through 2025 into Q1 of 2026. That progress has been supported by our contracting and payer collection experience as demonstrated on the previous slide. At this point, we're above $225 million covered lives for MI Cancer Seek, which we expect to continue to increase throughout the course of this year, and the assay represented more than 75% of our tissue volume in Q1.

As touched on before, we also delivered about 9% completed volume growth in MI Profile in the quarter compared to Q1 of 2025, including a record February and March period following the sales realignment that also drove stronger sequential activations versus Q4, and it's due to the great work done by our sales team following the realignment. And that momentum will flow into Q2.

On the Caris Assure side, this came in line with our expectations with Assure's volume growing 58% year-over-year. And importantly, volume also increased 7% sequentially. So we continue to see traction in blood as we grow our penetration there with a differentiated solution.

This continued leverage resulted in molecular profiling services gross margin being 65% in Q1, compared with 47% in Q1 of last year, which is an improvement of over 1,800 basis points year-over-year.

And finally, moving to guidance on Slide 13. You can see we're reaffirming our guide from February, and I'll address 2 key components on this prior to opening up the call the questions. Starting with volume. Based on the February and March end, we remain confident that the full year volume framework. We continue to expect tissue growth in the low teens and blood growth in the high 50s to low 60s. The stronger activation trend exiting Q1 supports our guide view and that timing gap between activations and completed cases should normalize as we move into Q2 and throughout the year with the realignment completed.

With respect to the pipeline, we have launched Caris ChromoSeq, which was approved by MolDX priced at $3,228 and also MI Clarity. After Q2, we will evaluate and incorporate the contribution from those launches along with any incremental impact from our continued sales strategies and commercial expansions.

On revenue, while Q1 performance points us towards the higher end of the range with a beat on our expectations for the quarter, we are reconfirming guidance today, and we'll evaluate after Q2 with the additional history of the new launches and the continued execution.

I will stop there and turn it back over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Michael Ryskin of Bank of America.

This is Alexa Chan on for Mike. I just have a couple of ones here. Maybe to start, can you talk about the impact that the sales realignment might have had on tissue volumes this quarter?

And then as a follow-up, can you discuss your confidence in achieving the 20% volume growth target for the year given the softer start? And we appreciate that the sales force was realigned and that trend improved in February and March, but it still appears to require a significant ramp from here.

Yes, as we -- any time when you realign a sales organization and put them into new territories, we saw a little bit slower start to the very beginning of the year. The beginning of the year sometimes is lower, so that's why we chose to do it then. But what we saw with tissue volume each month after that. And what we -- and what we're trending at, we feel confident that we're going to achieve 20% year-over-year by the end of Q4.

Yes. And one of the reasons why we also disclosed kind of the exit rate on the completions for February and March is what also gives us confidence. You can see based on those numbers, like we've improved dramatically on the tissue front from where we were running on a monthly rate last year with over 15,500 for kind of on average for February and March. So we believe that continued trend is going to benefit us as we go into Q2. So we feel good about the low teens guidance.

Our next question comes from the line of William Ruby of TD Cowen.

First question is just on the clinical volumes in the first quarter. Did weather hold back to clinical volumes at all? And if so, by how much?

No. So like the reason why we pointed out, we've gotten the cases in the door, so what we expect to happen and the reason why we're reaffirming that guide from a volume standpoint is what you'll see now is an improvement in the sequential growth from Q1 to Q2 that we were initially expecting kind of a 7% growth sequentially from Q1 to Q2. Now that's going to be 10%. So those cases will flow through in the second quarter, and it will be caught up by the end of the second quarter as we progress into the second half of the year.

Got it. And then if you could just discuss kind of the traction in blood testing. What's been the strategy impact? And where are you having the most success in types of accounts, and just on that, please?

Yes. We've expanded in, before Q1, our liquid product specialist team. A bunch of individuals that are highly skilled at helping the appropriate patients get blood testing. We saw 135% growth in their targets quarter-over-quarter. And because of that quarter-over-quarter growth, we've also said that we're going to double the size of that team again in Q2. Tissue profiling was our base business, and now we're getting good at selling blood profiling. And so for the right patients, we'll continue to do that, take those learnings to the rest of the sales force team.

Probably also worth saying, the version of Assure that we submitted to New York State significantly increases the amount of RNA profiling that we're doing, going up to about 600 million reads from 5 million reads.

Our next question comes from the line of Vijay Kumar of Evercore.

Maybe first one on a big picture question, if you will. I think, Luke, you brought up the CRUSH initiative. Space has been under pressure. Investors are nervous about reimbursement in the space. Just talk as high level, is there a rest of the space on the reimbursement front? And if so, how is Caris differentiated from other peers in the space when it comes to reimbursement?

Yes. It's the reason why we wanted to call it out in our scripts is there's been some confusion. What we've managed to do is it's a little unique in that we managed to go through and we went through the CDLT process. So our codes are like CDLT, not ADLT. So we actually feel very good and we actually submitted our PAMA submission last week based on the time frame. So we feel good about it.

I don't feel like there's already mechanisms in place outside of CRUSH for pricing review. And PAMA is obviously the key one for us. And based on our submission, we feel really good about our pricing. As I said, we don't expect any downward adjustments from that. So we feel good about the initiatives. We're supportive of CRUSH, obviously. We've been at this a very long time, and we kind of firmly believe and are -- that are pretty set from a pricing standpoint.

Just to be clear, Luke, on that point, are you trying to make a distinction between CDLT and ADLT and maybe CDLT is having more visibility on the pricing element if there's any rest of the space?

Yes. I think the -- how we price both MI Cancer Seek's PLA code and Caris Assure's PLA codes not go through the ADLT pathway. And so those were priced, MI Cancer Seek through Crosswalk, and Caris Assure through Gapfill. And then we are subject because we did not do ADLT to the 3-year PAMA cycle that's going through it. And as Luke said, we put our data and PAMA on May 1, and we feel very good about price stability.

That's helpful. Then maybe, Luke, one on the guidance comment you made here on Q-on-Q 10%. Was it a volume comment or a revenue comment? And if you could just clarify what was true-ups in Q1? What was underlying gross margins ex true-ups? And how should we think about gross margin progression?

Yes. Gross margin came in exactly in line with what our expectations was, in the kind of mid-60s. Again, our focus right now this year is more on the investment side. I think as we progress into later on this year and into next year, we'll start focusing more on improving the margin standpoint. So generally, it came right in line with our expectations were from the gross margin standpoint.

From a true-up standpoint, again, that was very minimal compared to what we've seen last year. We continue to execute and continue to appeal on the reimbursement front and continue to have success. So it was a very small percentage compared to what you saw in Q4. But as we progress throughout 2026, as I stated previously, those will start getting smaller and smaller as we continue to have the uptick in the overlying ASP.

Understood. And sorry, and the 10%, was it volume or revenues?

So that's from a volume standpoint. So the way we were thinking about it is that that will flow from Q1 will flow into Q2 from a completed standpoint. The cases came in the door in Q1, but it will be completed in Q2. So what our expectation is now for Q2 is, over 58,000 cases, which would be a 10% sequential growth from Q1.

Our next question comes from the line of Subbu Nambi of Guggenheim.

This is Ricki on for Subbu. Maybe one for Bobby. You ended the quarter with, I think it said over 270 sales reps, and earlier in the year you said you would increase head count by 20% to 25%. So it sounds like you still have more reps left to hire. Could you give us some color on how that hiring is progressing and also on how the 20 or so new reps that you've brought on year-to-date have been ramping up?

Yes, we're progressing right on track of where we want to be. We changed territory size -- or territories and made them smaller. So we went from 82 to 146 territories. We'll continue to grow that amount. We have the first wave hired. We're sending them through training. They're already out making calls. And we've significantly revamped our training program. We're excited with that development. And so yes, we're on track to hit that 300 number and hire them all in Q2, approximately 300 number, and we feel very good about the ramp-up and what we've changed.

Our next question comes from the line of Casey Woodring of JPMorgan.

This is Martha [indiscernible] on for Casey. Apologies if I missed this, but how should we think about 2Q volumes for tissue and blood, any color you can share there? And then also on the pharma R&D revenues?

And then another one would be on the initial MCED test uptake, are you seeing any contribution this year?

Yes. I definitely take that. So as we just kind of just stated, our expectation is for a 10% sequential improvement from Q1 to Q2 in volume. That would get you above 58,000 cases, which, again, we feel very good about based on what we saw exiting the quarter.

And then from a blood and tissue standpoint, you will see those tissue cases flow into Q2. So we would expect to be in the 47,500 cases for tissue and approaching over the [indiscernible] we feel very confident about those for Q2.

And then from a revenue standpoint for Q2, our expectations right now based on the initial guide that we put out in February was for that kind of 32% growth in overall total revenue.

And then the last question, contribution from Caris Detect. Again, we'll assess that. Our plan is to still launch that in Q2, that we're progressing along very nicely. And then I'll assess that as we get into the Q2 earnings on what the contribution is going to be for the second half of the year.

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

This is Albert Hu on for Patrick here. Just curious on the profitability side for both 2Q and for the year. I think you previously had noted a certain range -- a certain cap for the EBITDA profitability, and it's been since updated to positive. But just curious what you can share with us on both the EBITDA assumption for 2Q? And then for the full year, I know you have some investments in there, and maybe perhaps share with us what those are as well.

Yes. So from an EBITDA standpoint, from a free cash flow standpoint, I'll repeat what I kind of stated on the last earnings call. We're going to utilize the kind of financial profile we have. So we're going to get that pretty close to neutral from a free cash flow standpoint in Q2.

One of the key things that we're going to push on is with the early detection launch, there's going to be an increase in Q2 from a CapEx standpoint. We're expecting about $30 million of CapEx, of property and equipment purchases. Again, that includes the NovaSeq Xs that we're ramping up. We've also started to ramp up from an inventory purchase standpoint ahead of the detection launch. So you're going to have additional spend from that standpoint.

So our goal going into Q2 is to utilize, obviously, the free cash flow that we're generating to fund the preparation for Detect launch, along with pushing, obviously, MI Clarity on Caris ChromoSeq as well.

Then from an EBITDA standpoint, we're not guiding to that metric because, again, the key focus for us is pushing the pipeline through, pushing through the commercial activities that Bobby is putting in place and along with getting the Detect product launch. So from an estimate stand line for Q2, we have the 32% growth for revenue and then expect a mid gross margin of 65%, is where we expect gross margin. And we'll also ramp up our OpEx as well from where we were at $136 million to over $140 million. So again, that will get you a small EBITDA, but it's not our primary focus for Q2.

Got it. That's super helpful. And just one more on -- well, first, congrats on the pipeline coming out here. It's great to see launches and reimbursement coming through. And just curious on the MRD front, I think you mentioned on the update, on the prepared remarks, that it's still prepared for being launched. I'm just curious what that priority is, MRD exactly, what is that priority in the pipeline for you guys? Is that something that you guys have put emphasis on and aiming to launch perhaps late this year or sometime next year? Or what can you share with us on the MRD and time line front, please?

Now that we have these other product launches done and behind us, MRD is the next priority. So we'll be focusing on that quite heavily.

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

I wanted to start on a pipeline question. Now that you have MolDX approval for ChromoSeq and it's launched, can you speak to the unmet need? I think oftentimes, there's a whole lot of conversation about solid tumor profiling. But can you just sort of speak to the unmet need in myeloid?

Sure. So what happens today is that those patients get a whole lot of small channel tests, a combination of different technologies. And so it's not comprehensive and they often [ lift ] things. Those tests are also not designed to pick up resistance components. And so with our approach, we're able to, in one fell swoop, not only identify all of the components that allow optimal therapy selection, but also identifying when that therapy is no longer effective. So it's a truly comprehensive approach to hematological malignancies, and that's a hotspot that is being done today.

And with the turnaround time that the team was able to achieve and what we're seeing from the launch, that gets patients a complete answer faster than they would get we're testing with multiple different tests trying to chase down a diagnosis.

Okay. That's helpful. I know that breast cancer is one of the important indications in your early detection initiatives. Can you just speak to that disease state relative to others? How should we think about the landscape progressing over time as you guys think about screening for various cancer types?

Yes. So I mean breast cancer is one of the more common types of cancer. It's already highly screened for. And mammography has its limitations, and so it's important to us to make sure that we're servicing that patient population really, really well. The performance that we have shown in Achieve 1 is already superior to mammography. And so it's inevitable that older technologies are going to be replaced by future superior technologies, and that's what's happening right now.

Our next question comes from the line of Evie Koslosky of Goldman Sachs.

So I wanted to ask on the quarterly run rate you gave for February and March of 56,000 tests relative to the 52,800 you reported for the quarter. I think you said that's up 20% year-over-year relative to February and March last year. I guess, could you talk through the split between tissue and blood? And then how durable you think the acceleration in volumes is post the sales force realignment? And was there a level of pent-up demand in the latter half of the quarter?

Yes. The split follows our normal split growth when we went from January into February and March. So we saw ramp-ups in both products. And we're excited about what that was able to do and the quickness of that turnaround.

As we look at that volume, as Luke has discussed, going into Q2, we still feel very confident that we'll be able to achieve the numbers that we've set forth for guidance, and we expect both products to continue their growth.

Great. And then any update on the M&A and kind of capital allocation strategy? I mean I know there's a focus kind of to reinvest more organically, but any specific areas or gaps in your portfolio that you would look to fill inorganically?

Evie, it's Brian. I don't -- there's no gaps. And we've been a pioneer through organic growth and building our technology platform. So there's nothing in particular that we think we need. On the other hand, we're very strong with respect to our financial profile, our new debt facility gives us additional flexibility. So we're definitely in a position of being flexible and tactical if we see the need.

Our next question comes from the line of Tycho Peterson of Jefferies.

This is Noah on for Tycho. I wanted to start by asking about the pharma R&D business. I think you came in a few million dollars light of consensus expectations on revenue. How are you thinking about the commercial investment in that business? Can you speak to orders or backlog performance that justifies maintaining the guide here?

Yes. So as we kind of stated on the last earnings call, you always have Q1 and Q3 are always kind of the lower quarters from a pharma standpoint. It's just a natural cadence that we progressed through throughout the year. So the revenue, the reason why we're maintaining the guidance is that revenue delta from the Q1 expectation, it's based on contracts we already have under contract. So the Genentech deal that we publicly disclosed, there's revenue dollars that moved from Q1 that will go into Q2. And the same with some of our data partners that we have under contract that will deliver that data in the next quarter or 2. So we feel good about that.

And we do expect from a Q2 standpoint to obviously see that increase that we've seen over the last couple of years where Q1 is always lower and Q2 ramps up, Q3 comes down and Q4 ramps up. So we feel confident right now based on that -- the existing guidance playing out.

Okay. That's helpful. And I wanted to ask one more. I know a competitor had a recent study that went to ODAC for liquid biopsy informed drug trial that ODAC voted against. How are you thinking about implications for serialized liquid biopsy testing? And do you have any embedded assumptions for liquid testing, test per patient expanding in the long run?

That was really more about 1 specific mutation, not liquid in general. There's still incredible clinical utility of liquid profiling. So the fact that the ESR1 targeted agent wasn't approved doesn't really impact the broader utility of profiling.

Our final question comes from the line of Kyle Mikson of Canaccord Genuity.

This is Alex Vukasin on for Kyle Mikson. So congratulations again on the ChromoSeq approval and launch. Just to kind of tap into that again, what is the rate that you have for this test? And from like a dollar perspective, what is the addressable market we're looking at?

Yes. So the rate is $3,228, what we got from MolDX. So from a market standpoint, Bobby?

Yes. From a market standpoint, there are about 50,000 patients that made 3 indications that are set forth in the MolDX -- indications for the 3 different ones. There are existing medical policies for commercial lines of business that we believe that when we submit to payers that we will gain coverage on, because of the depth and performance of our assay. And so we're already deploying the team to go talk to the payers and add where we are already contracted with MI Cancer Seek, that would give us the opportunity to add the coverage there as well.

Got it. Just one more for me. You spoke to the expansion of your Precision Oncology Alliance in this call for which you plan to host summit on the eve of the ASCO conference. On ASCO, can you elaborate what types of data you'll be presenting for pipeline and recently launched products, including MCED and MRD among others?

I mean we have a lot of data that we'll be presenting. It's embargoed until the conference so we can't really talk about it now. But there's going to be a lot of.

Thank you. This does conclude the Q&A session and the program. I'd like to thank you for your participation. You may now disconnect.

Good afternoon, everyone, and welcome to the Caris Life Sciences Q4 2025 Earnings Call. My name is Dana, and I will be your coordinator today. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker, Russ Denton. Please go ahead.

Thank you. Earlier today, Caris Life Sciences released financial results for the quarter and year ended December 31, 2025. Joining the call from Caris today are David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO.

Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our quarterly reports on Form 10-Q and our annual report on Form 10-K to be filed with the SEC.

Assessed as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information discussed in this conference call is accurate only as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today.

A copy of today's presentation materials along with an interim readout of our Q1 study can be found on our website. I will now turn the call over to Brian.

Thanks, Russ, and thank you all for joining our fourth quarter 2025 earnings call. This is our first year-end call as a public company following our June IPO last year, and we're pleased to report another record-breaking quarter, finishing the year with excellent performance across the company in terms of growth and underlying financial strength.

I want to start with what has always mattered most at Caris or mission. Caris was founded to make precision medicine a reality. We aim to fundamentally change the way disease is characterized and treated. We believe more information is more power and every patient deserves more power in the battle against disease. That mission is being powered by a molecular platform, which benefits from scale and highly differentiated capabilities as illustrated on Slide 3.

Our platform continues to scale. And in 2025, we completed just under 200,000 individual cases. With this clinical activity, we have recently reached a platform milestone as our molecular data set now exceeds over 1 million profiled cases and has grown into one of the most important clinical genomic resources in the industry. As the industry evolves, the intersection of molecular science and AI is accelerating technological innovation.

Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We've had an outstanding fourth quarter with total revenues increasing 125% year-over-year to $293 million.

As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $282 million in the fourth quarter representing an increase of 199% year-over-year. Pharma R&D Services revenues were $10.8 million in the fourth quarter, and we're making important progress in CDX data discovery, including the December announcement of the Genentech Discovery deal as well as a CDX collaboration.

In summary, across the board, we had a very productive fourth quarter illustrated by the quarter highlights on Slide 5. The strong revenue performance, combined with the operating leverage inherent in our business model has produced excellent financial results, including the following: revenue growth of 125% and which was driven by volume growth of 20% and a 150% increase in clinical ASP. This revenue growth has led to significantly improved gross margins of 75% on a GAAP basis, up from 54% in the fourth quarter of 2024. It also represents a significant sequential increase from the 68% in the third quarter.

With this gross margin improvement this quarter, we generated positive GAAP net income of $82 million and adjusted EBITDA of $106 million as well as positive free cash flow of $39.7 million. This is our third straight quarter of positive adjusted EBITDA and positive free cash flow. This strong profitability profile is unique in our industry and provides valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels such as [indiscernible].

In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $800 million, an increase of $43 million in the quarter. The Caris data set has continued to grow with our clinical profiling activity and now exceeds 1 million genomic profiles and 740,000 match profiles. Since every profile has been generated with our WTS technology for many years, our data set now features 627,000 exomes and 678,000 transcriptomes. This gives our data set tremendous power for internal product development as well as attractiveness as a research partner for academic medical centers through the POA as well as for biopharma. As the results demonstrate, our financial performance gives us unique strategic flexibility, and we intend to use that edge in 2026 to make significant investments in both the early detection business and our therapy selection channel.

In early detection, we expect to realize the long-standing vision of our CEO, David Halbert, of launching a revolutionary cancer early detection test. Caris detect has the potential to bend the cancer mortality curve and ultimately make cancer a curable disease. We believe that the implications for this test are truly profound both for Caris and for our society. In our core therapy selection business, we plan to invest in our commercial channel to broaden our reach and deepen our relationships to accelerate growth.

We have a new Chief Commercial Officer Bobby Hill, who took on this responsibility in the fourth quarter. We're extremely excited about the opportunities we face and the new initiatives that Bobby is driving, ranging from the expansion of the sales force and territories to enhance programming and education.

Finally, we will make these investments while maintaining positive adjusted EBITDA and free cash flow. Our strategy is to maintain financial discipline through a strong balance sheet and profitability, and these financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and physicians.

I will now turn the presentation over to Bobby Hill to provide an update on our commercial business and related strategic initiatives. Bobby?

Thanks, Brian. I will provide a brief update on our molecular profiling business along with our initiatives for the commercial teams in 2026.

Starting on Slide 6, this shows our strong molecular profiling revenues performance for the full year, with revenues increasing 120% to $766.7 million. This excellent revenue growth was driven by a 22% year-over-year growth in clinical case volumes to approximately 199,300 profiles and a 79% increase in average sales price, reflecting our market access and billing team's strong execution throughout 2025. This ASP growth was driven by our successful launch of My Cancer Seek on January 1 of last year, and these benefits are reflected on the slide, where tissue ASP increased by 83% to over $4,000 and our blood ASP increased by 69% and to just under $2,800 driven by billing our new PLA code and improvement payment for Caris [ Assure ].

Luke will discuss the breakdown of this further during the financial update, along with the trends we saw play out during 2025. This illustrates the growth that our sales team has generated in clinical profiling this year, which I am encouraged about as we see progress into 2026 already. Our Q4 growth was 20%, which was sequential improvement from 18% in Q3 '25, with Caris Assure delivering 59% year-over-year growth in Q4 '25 and continuing to gain traction.

Entering 2026, in order to broaden our reach and deepen our relationships to accelerate growth, we are making a continued investment in our commercial channel, by expanding the sales force, including expanding our liquid specialist team to ensure we are maximizing the impact of our excellent teams. Next, strengthening our product and value proposition messaging by focusing on key differentiation of our technology and the clinical impact, the advanced technology has on patient care, as evidenced by data publication, scientific literature and enhancing our and elevating medical education and training across not just the customers we serve, but also our internal teams.

Since we are now also consistently reaching over 6,000 oncologists across the country and have EHR integrations of approximately 3,100 clinical sites where approximately 75% of our orders come in electronically. This will be another area that we continue to invest from a customer and team standpoint to make ordering process more streamlined. I joined Caris because of our science and technology differentiation and forward-thinking development of solutions, and I'm excited about continuing to expand the Caris commercial reach to help more patients as we go through 2026.

I will now turn the presentation over to Dr. Spetzler to discuss our progress on our product pipeline, in particular, around Caris Detect. Spetz?

Thanks, Bobby. So getting to our achieved on interim results that we wanted to share today and are reflected on Slide 8. As you are aware, this study is for supporting the upcoming launch of Caris Detect, our whole genome sequencing based MSAD blood test in Q2 of 2026. ACHIEVE-1 matters not just because it's following our philosophy to always put the patient first, which includes not limiting our development decisions based on cost, but to strive to pursue to the full extent possible the very best performing test. This has been successful for us with our therapy selection assays, which are the most comprehensive on the market, where we run whole exome and whole transcriptome sequencing on every eligible patient sample and we are again pursuing the same path in early detection.

The interim readout reflects the benefits of that approach where we are sequencing at incredible depth across the whole genome. Our hypothesis is that cancer is fundamentally driven by molecular abnormalities and these abnormalities show up in multiple waves, driver mutations, epigenomic changes, transcriptomic changes and Antapite. Many approaches in blood-based early detection have leaned heavily on epigenomics alone. We took a broader biological view by using ultra deep whole genome sequencing to capture as many genomic alterations as possible. That richer signal set is what we believe is driving our performance and it reinforces our view that relying on a limited slice of biology is not sufficient to reflect the diversity of cancer. What's also different about Caris Detect is the foundation it's built on. The test leverages Caris molecular profiling data sets, which, as Brian mentioned, has now surpassed 1 million cases and includes more than 50 billion molecular markers. That scale and depth allowed our AI models to identify subtle biological signals associated with early-stage cancers with a very high resolution utilizing the whole genome.

As shown on the slide, the interim readout includes 2,122 total samples, 617 cancers, spanning stages 1 through 4 and 1,505 patients with no known cancer at the time of the blood draw. A key point on the normal cohort. These control samples come from individuals who had screening or symptomatic screen, which is a higher likelihood population than the general population. We have at least 1 year of follow-up data on 22.5% of the normals, of which 35% we identified as our asymptomatic screening population, 121 individuals with no significant risk factors for cancer and at least 1 year of follow-up after the blood draw.

Of note, in the total cohort, 7% of patients had a subsequent diagnosis of cancer, reflecting that the control population is truly high risk. Now to the results. From the interim readout, we observed strong sensitivity that increases with stage and high specificity. Sensitivity by stage was 56.8% on Stage 1 with 266 patients, 70.1% in Stage 2 with 137 patients, 77% in Stage 3 with 105 patients and 99.1% in Stage 4 with 109 patients.

For Stage 1 and 2 combined, ACHIEVE-1 reported 63.1% sensitivity. We also evaluated Stage 1 and 2 sensitivity by lineage across a number of cancers. Selected examples include and are included on Slide 9, with breast cancer being 53% sensitive across 253 patients; valve having 62.2% sensitivity with 45 patients, prostate, 78.9% with 38 patients, uterus, 73.7% with 19 patients, lung 86.7 with 15 patients, pancreas, 71.4 with 7 patients and head and neck cancer at 100% with 7 patients.

On specificity in which we followed 22.5% of patients for approximately 3 years following their blood draw, we've demonstrated the following: 99.1% specificity in the screening population with an equal 121 which we have follow-up data on these subjects that had no symptoms of cancer, no history of cancer and no family history of cancer and were not subsequently diagnosed with cancer within 2 years following the blood drop, 95.3% specificity in the higher-risk normal population with 1,505 patients, of which 600 undiagnosed subjects with at least 2 years of follow-up, roughly 7% of patients were subsequently diagnosed with cancer, indicating our enrollment criteria enrich for high-risk subjects.

Overall, our model performance measured by AUC was 0.90. These are interim results, which we are extremely excited about. ACHIEVE-1 also includes a blinded holdout validation cohort of approximately 865 samples that were held out for independent testing. That blinded validation is currently in process, and we expect to support these results in Q1.

In parallel, we have also begun processing samples from ACHIEVE-2, which is the next step in the program. So to summarize, ACHIEVE-1 interim results show strong performance, including Stage 1, 2 sensitivity of 63.1%, high specificity and an AUC of 0.9 across a large data set spanning 35 cancer types and with no cancer types with help from the results. We view this as a meaningful milestone as we move forward with the blinded holdout readout as the next key catalyst.

Moving to Slide 10. This also reflects the status of our robust pipeline, and I'll touch on these before letting Luke wrap things up with the financials. First, Harris Chroma Seq is our whole genome plus full transcriptome offering focused on therapy selection in hematological malignancies, particularly AML, MDS and MP and select cases of suspected myeloid malignancies where cytopenias persist and other cases have been ruled out.

Similar to what I've discussed with detection, what matters here is depth and breadth. We're running greater than 200x coverage across the whole genome sequencing and the assay is designed to detect the full range of clinically relevant genomic alterations, mutations, fusions, copy number changes, expression employing with roughly 1.6 billion reads per patient.

From a status standpoint, we have responded to MoIDX comments on our TA submission and will launch once coverage and pricing is determined. Next is Caris MI Clarity, which is tailored for breast cancer patients who are ER-positive HER2-negative generally stage 1 or 2 and no negative or in certain cases, 1 to 3 positive nodes, particularly in post-menopausal patients.

This solution has 2 alternative offerings, 1 combining my profound platform with digital AI and the other that is digital AI only. Both are intended to support both early and late recurrence risk score. The goal is straightforward, improve treatment decision-making and reduce unnecessary treatment while identifying patients who truly need to be receiving therapy. Operationally, we are in launch planning and pursuing reimbursement through the 2 pets. The NGS plus digital AI and digital only. We expect that the digital AI only path will be faster, and it is likely that we launch that version of the product first.

Importantly, both versions of my Clarity offer superior performance to currently available offerings. Third is Caris MRD tumor-naive where the intended initial use case is colorectal cancer. The clinical intent here is minimal residual disease assessment in patients with stage 2 and 3 solid tumors postsecuritive intent treatment, helping to inform adjuvant therapy decision window. Importantly, this is designed to work from the whole blood sample without requiring an individualized tumor-informed assay build. As previously discussed, MolDX requested additional data, and we are working on creating and compiling that data, and we'll provide updates as we progress on that front. And then Caris MRD tumor informed, which is our whole genome approach intended for pan tumor applications in stage 1, 2 and 3 disease. This is based on tumor-normal whole genome sequencing to identify patient-specific trackers with a proprietary approach designed to minimize false negatives. The strategy is to maximize tracker counts and to reach ultra-low PPM detection capability because in MRD, sensitivity at very low levels is required. We've initiated development and launch planning, and we will continue to provide updates as we progress throughout the year.

We have also launched 5 new AI signatures on our molecular tumor board reports that is available to physicians as part of our mine cancer seek in breast, pancreatic, brain, lung and ovarian cancer. These signatures offer insights into which patients will benefit from available approved therapies and show how our whole exome whole transcript on strategy provides the best therapeutic guidance and demonstrates how profiling is becoming more proprietary and not commoditized. Small panels of hundreds of genes are not sufficient to offer these types of insights. As Brian referenced in the investment strategy, our goal this year will be to continue to push on all pipeline activities as quickly as possible in order to make these comprehensive solutions available to improve the lives of patients.

I will stop here, and I'll pass it over to Luke for the financial updates. Luke?

Thanks, David. As Brian stated earlier, we had another outstanding quarter in terms of financial performance. So I'll run through some selected highlights prior to getting to the 2026 guidance.

Turning to the financial overview slide. You can see we delivered another great quarter and finished our first year-end as a public company very strong. with total revenue increasing 97% for the full year, reflecting exceptional organic performance across the business. As part of this, you will notice that our final revenue numbers for Q4 and the year is about $12 million higher than our Plimer January numbers. And this is the result of seeing continued positive collections from payers.

So we adjusted our crude ASP rates in Q4 of '25 to account for these additional collections. The main driver of our 2025 growth as expected, was our molecular profiling business, which grew 120% compared to 2024, due to this ASP upset along with the volume growth.

Our therapy selection volumes were up 20% for the quarter and 22% year-over-year, slightly above our expectations and an improvement from the Q3 growth rate of 18% that Bobby mentioned. As discussed publicly, in January, while our pharma revenue was down year-over-year, we were happy with how it finished with our target discovery announcement with Genentech and fully expect to continue to build on that momentum into 2026. As we start to recognize revenue from that deal along with continuing to build on the contracting pipeline.

Overall, our revenue growth and financial performance continues to show up on the bottom line, with positive adjusted EBITDA and positive free cash flow, not just for the quarter, but with positive adjusted EBITDA of $138 million and positive free cash flow of $67 million for the full year of 2025 and as Brian mentioned, we ended the year with over $800 million of cash on hand. 2025 was a superb year in terms of molecular profiling services.

As you will see on Slide 12. We took a measured approach as we entered the year in terms of stepping up our ASPs from the FDA approval of the -- MI Cancer Seek solution, and I'm delighted to say that after the maturity after 12 months, it has demonstrated real sustainable uptick with payers' appreciation appreciating the comprehensive approach of our solutions and the signatures that are also included as part of the offering, 1 of which we press released on Tuesday. As reflected on the slide, the favorable payer response led to additional revenue exceeding prior accruals with the majority of the additional revenue related to cases performed in 2025 and only $33.6 million being related to benefit from 2024 and prior year cases.

This has resulted in us being able to reach an ASP for our 2025 cases of $3,876 per tissue and just above $2,500 for our blood asset. These improvements are due to various tailwinds we have seen occurred throughout 2025 and for which we expect to continue to benefit from in 2026, and we have listed some of these on the next slide along with the positive trend in molecular profiling gross margin. The key driver for tissue was obviously the impact from our FDA approval and the subsequent increase in pricing and the benefits we saw through contract, where we have now surpassed over 225 million covered lives from MI Cancer Seek. MI Cancer Seek represented greater than 70% of our tissue volume for the full year of 2025, almost over 75% of our tissue volume for Q4 and we're able to increase our tissue growth rate for the full year to over 16%, which was up from the 2024 growth rate.

For [indiscernible] our PLA code was effective for the full year in 2025 and payers responded when we discuss both solutions together, and this played out in the reimbursement uptake over the past year. We've also seen a steady improvement each quarter as we continue to gain traction in volume, with Q4 reflecting a 13% sequential growth from Q3 of 2025.

With regards to our Medicare ASP, as you know, our solutions went through clinical lab fee schedule pricing of CDLT and not ADLT. Accordingly, they are subject to the PAMA CDLT reporting process, which is on a 3-year cycle. As part of the recent Consolidated Corporations Act PAMA was amended so that the next reporting period is from January 1 to June 30, 2025. And based on the initial view of our data, we do not expect any downward adjustments to MI Cancer Seek the Caris Assure through 2029.

Staying on the same slide, the improved reimbursement had a very positive impact on the molecular profile in gross margin for the year as demonstrated by the progression seen on the graph. We finished at 66% GAAP gross margin for the full year. And even excluding the additional revenue from exceeding accruals for prior year cases, this was only slightly below that at 64%. This improved gross margin allows us to continue to invest and develop comprehensive offerings, validating the long-term approach we take with our solutions.

All in all, it was a fantastic year from a financial performance standpoint, demonstrating the excellent work by everyone at Caris as we wrapped up our first year-end as a public company.

Now turning to the outlook for 2026, which is reflected on Slide 14. Consistent with our prior approach, we're initiating full year guidance based only on our current portfolio. and will only add the pipeline solution to our guidance once they have started to generate revenue. This allows us to take a deliberate approach with gated investment strategies to ensure that these will flow through as milestones are met throughout the year. With the 2025 results, we delivered on our goal to demonstrate that our model can be self-sufficient to generate free cash flow. And now going into 2026, our plan is to reinvest from this position of strength and continuing to progress on our differentiated pipeline along with our commercial infrastructure.

Therefore, for the full year of 2026, we expect total revenue for existing solutions to be in the range of $1.0 billion to $1.02 billion, which represents growth of approximately 23% to 26% compared to 2025. On the clinical side, therapy selection volume is expected to grow approximately 20% year-over-year in 2026, reflecting continued demand expansion and broader adoption across our ordering base.

And as Bobby discussed previously, we've begun making those additional investments in the commercial organization. Within the total revenue range, we expect molecular profiling to grow approximately 21% to 22% in 2026. But excluding prior year additional revenue from exceeding previous accruals, this implies a molecular profiling growth rate of approximately 26% to 28%. From an ASP standpoint, our focus remains on continuing to improve on commercial payer contracting as we progress into 2026. And for tissue, we're tracking towards approximately $4,000 a case which we now expect to reach in Q1, followed by continued progress throughout the year with this initial guidance reaching approximately 4,200 for the full year 2026.

For blood, we expect ASP to be in the range of $2,400 to $2,500 for 2026 and will seek to further expand contracting, but any potential upside is not reflected in the guidance. With regards to pharma and research revenue, we expect $75 million to $85 million for the full year of 2026. This reflects contribution from our previously announced Genentech deal a recent companion diagnostic collaboration along with the development of contracting pipeline and our investment in additional dedicated team members for our pharma customers.

As in prior years, we expect the cadence as more weighted to the second and fourth quarters, with Q1 and Q3 being lower than Q2 and Q4. On the expense side, we expect GAAP operating expenses to be in the range of $590 million to $595 million, representing an increase of approximately 19% to 20%. This increase is primarily driven by the commercial expansion of pipeline trial activities, as demonstrated by the excellent results from G1 and also then including the ACHIEVE-2 study of advancement of our Assure assay development models, including our planned New York State submission.

Finally, with regard to free cash flow and adjusted EBITDA, we expect to remain positive for the year while funding these investments. One additional incremental item in 2026 will be CapEx as we prepare for the early detection launch. After spending approximately $16 million in 2025, we expect CapEx in the range of approximately $60 million for 2026. This spend is tied to increased capacity and will be staged and milestone driven, so will not be applied all at once and spread throughout the year. As we have stated previously, we're not optimizing for peak margin in 2026 at the expense of long-term value, but we're committed to operating within our guardrails remaining positive free cash flow and adjusted EBITDA, while we execute on the milestone by continuing to drive our top line growth.

I will wrap up there. And with that, we'll now turn the call back over to the operator.

[Operator Instructions] Our first question comes from the line of Dan Brennan of TD Cowen.

Maybe just first one, just on the volume outlook, the 20% volume growth. I don't think I've heard you did you guys break down how that's going to break down between tissue and blood -- so you can give us that color? And then did you give us any color on pacing for revenues as well? So where should the first quarter land?

Yes. So Dan, so on a total volume basis, we guided to the 20%. The 20% is broken up very similar to Q4. So lower teens for tissue and then high 50s, lower 60s for blood from a growth standpoint. And then on the revenue outlook for Q1, right now, we're in that 70% to 74% growth range for total revenue.

Okay. And then maybe as a follow-up, so Bobby is now running the sales force. You've added some headcount. So can you elaborate a little bit on like how big the sales force was previously? What was the decision to bring Bobby in? How many people are you adding anything on the strategy? And then have you baked in any impact from these additional salespeople, will they drive revenues and volumes this year? Or is it going to hit in the fourth quarter? How do we think about the contribution from this added head count?

Yes, yes. So I can definitely take that, and then I'll let Bobby chime in on. So effectively, Bobby joined us, obviously, to lead our reimbursement efforts, knowing that Bobby also has additional expertise that would transition into the commercial operating role in the future. So from that standpoint, Bobby, obviously, has been here kind of 1 year, 1.5 years right now and done excellent work, as you can see in our results with the reimbursement. So as we go forward and what we're planning for 2026, we announced at JPMorgan that we were about 250 salespeople, and we wanted to increase it about 20% to 25%.

So get that back up to about 300 people. Again, Bobby has done great work with kind of going through the territories and see where we can get the most benefit from that. To answer your last question before I pass it to Bobby, we incorporated the expense, but we're taking a measured approach with our volume. We obviously think this is going to pay off for us in the second half of the year, but that's not incorporated in the 20% number. The 20% we were able to achieve in Q4, which was what we were expecting to go into 2026.

So I definitely think once we have further experience with the uptick in salespeople and obviously, all the initiatives Bobby is implementing that you could see benefits, but we're not guiding to that right now.

Our next question comes from the line of Subu May of Guggenheim.

Spetz, thank you for sharing the MSA interim data you provided specificity data, which delineates between asymptomatic screening and undiagnosed population -- can you further define these populations? How do they differ? And why did you do this? What is the significance from the perspective of clinical regulatory reimbursement and commercial?

Yes. So in the higher-risk population, what we saw was that there was a 7% undiagnosed cancer rate. And so -- now if 7% of your control samples are actually positive for cancer, then it's going to lead to a lower estimate of specificity than what you would see in a general population where the incidence rate is much, much lower. And so the kind of clean cohorts where we have the longitudinal outcome data showing that they are actually healthy patients is going to be reflective of the specificity in that general healthy screening population, whereas the or the symptomatic screening population, that high-risk group is what we would expect in high-risk clinics. And so the clinical context of the patient matters a lot in how we think about the results, and we want to make sure that we're clear and careful about characterizing test performance across the various populations that we'll be marketing [indiscernible]

Very helpful. And Luke, you did mention how pharma -- how AI is going to be a tailwind and how the database is going. Do you have an early outlook to share on the pharma R&D spending environment at all as far as increasingly looking to spend on AI and could Caris be a beneficially?

I definitely think we could be a beneficiary, especially from our molecular data set that now has over 1 million profiles. But from our guidance standpoint, Subu, like the $75 million to $85 million, it's based on looking at what we've been able to do historically from a base run rate, knowing that we signed the additional Genentech deal that we publicly announced. We have a couple of CDx collaborations, 1 that was completed that we're not announcing publicly at the request of our pharma partner, that allows us and gives us great confidence as we go into the year in order to achieve that. But you're right, there's definitely a lot of trends, and we've had continued outreach, particularly around our data and the use of that in AI.

Our next question comes from the line of Michael Ryskin of Bank of America.

Congrats on the quarter. Dan asked on volumes, I guess, on like the ASP 1 for tissue, I think ended correctly, you talked about 4000 in the first quarter and then reaching approximately 4,200 for the full year. I recognize obviously there's a lot of ASP true-up in 3Q and 4Q, but that still seems like relatively conservative relative to what we talked about in the past and the ability to reach sort of closer to that high 4,000 range. Just wondering if you could talk about how much conservative you have built into that what your line of sight is on the commercial side of things and just sort of talk about the -- what true-ups could contribute on top of that.

Yes. So the answer to true-up questions. Like we purposely launch my cancer seek at the start of 2025, knowing that we'd get the full 12 months of the activity. So we could get all the kind of true-ups incorporated as much as possible in 2025. A Because, again, I always take a measured approach when it comes to ASP, I'd like to see the history play out. And now that we have that -- it's a good starting point as we go in and knowing that we'll get to the 4,000 based on the contracts we signed that kick in at the start of the year. I definitely think there's headroom there. But I do want to be measured again going into this year. We've done excellence on ASP.

Obviously, it's the best in the industry, and it's due to the decision David Halbertmade to go to whole eggs and the whole transcriptome like 5 years ago. that has paid off for us. So going into it, the 4,200 is kind of where I want to guide to right now. And then we'll progress will progress throughout the year. We'll get additional contracts, as Bobby said, and then we'll just see, Mike, where shoots up. But from a guidance standpoint, I feel really good right now with the 4,200 for the full year.

8 years ago. Yes.

Good point. Good point. And then for my follow-up, for the guidance for this year, you kind of left it relatively open ended in terms of adjusted EBITDA positive. There's a big range to what positive means. And I think just to combine this with a commercial reinvestment point. Could you maybe talk about the puts and takes of that? How much of a lever you think that could be? And sort of how you think about that balance, right, of investing, getting maybe a little bit more on the margin side of things versus the other way around?

Yes, it's going to be pure like utilizing the leverage, Mike. So for us, obviously, we're able to generate like over $136 million of adjusted EBITDA for the full year of we're going to utilize that going in. So you obviously see the increase of $100 million in OpEx. What we're planning on doing, especially in the first half of the year is utilizing that. And I've stated on multiple calls, obviously, since we became public like the deal go for me going into 2026 would be to kind of run neutral in the first half of the year just by getting these investments done.

Now we'll continue to generate. We're generating, obviously, the $60-plus million of free cash flow because of the position we're in, we're going to utilize this. And again, that's why we're just guiding to being positive right now. I'm not going to throw out that it's going to be $150 million or $200 million. But if we execute, obviously, we continue to drive margin from a profitability standpoint past 2026 and into 2027. And obviously, we're very excited with the early detection launch, and that's kind of the primary focus for the first half of this year.

Our next question comes from the line of Vijay Kumar of Evercore ISI.

Maybe, Luke, my first one is on ASP assumptions here for fiscal '26. Did I hear you correct when you said blood is 2,400 to 2,500, I thought the fiscal extra blood ASP was north of 2,500. So maybe just walk me through on why blood steps down and that 4,200 on the tissue side. does it contemplate the full normalization of PLA uplift on the CMS side? Or is there some more room left when you think about '27.

Yes. So answer to the blood first. I'd like to guide from a blood standpoint in the $100 range, like you're right, like the 2,500 is kind of at the top of that range is where we ended up. I definitely think there's some upside to that, as I mentioned in the pre-prepared remarks. So right now, what I would guide to is in that 2400 to 2,500 just based on the mix of cases is where we came up with that guideline because obviously, Medicare has paid better, commercials paid a little less and there's sometimes fluctuation amongst that in the quarter, especially as we ramp up our blood volume.

Obviously, it's been growing quite nicely from a sequential standpoint. So that's the reason for the 2,400 to 2,500. But I'm not guiding to us like a massive step down or anything. I just want to be cautious with the guide from the blood ASP. And then on tissue, we put out the metrics that obviously, over 75% of our tissue volume is going to be under the PLA code, and we're making great progress there. But you do have the remaining 25%, that's not.

So we've hit our goal that we came into the year in order to get above that kind of $3,600 for Q4 and obviously announcing that we're going to get to $4,000 for Q1. And I feel good with the progress that our excellent market access team is making, along with our billing team to continue to push on that and get that to a higher rate. But now from a guidance standpoint, like the 4,200 feels really, really good right now, and that's what I want to stick with from the guidance standpoint.

Understand. Just to be clear, too, that 4200 volumes under PLA in 2026?

Correct.

Understood. Then maybe my follow-up on this step-up in OpEx spend for '26. I'm curious, when I look at the market, the market seems to be rewarding companies in the space for volume growth rate versus you guys being focused on profitable growth and that's a distinction that you made. -- does this OpEx step-up signal that, hey, if the market is not rewarding cars on profitable growth, let's put volumes. So just walk us through the rationale of this OpEx step-up where is the spend going? Is this for existing test for new test? And when you think about productivity per rep, how long did it pay for these reps these new reps to get productive?

Yes. So I'll go first and then I can let team obviously chime in as well. So yes, it's definitely including the OpEx standup step up like 30% growth in sales and marketing. So that's kind of the #1 key area. The other -- the second key area, too, is in R&D and having that other 30% step up in R&D again, as Pat walked through with the C1, like we're extremely excited about that, and we want to keep pressing ahead with the ACHIEVE-2 data. So that's going to be a priority from the R&D spend standpoint. And then with the sales and marketing, normally, it takes about 6 months for that to play out. But again, what we did with our guide because -- we did a great job last year of coming out and being measured on what we're guiding to. We didn't want to assume any uptick -- big uptick in the second half of the year. again, all companies go through this year. Q1 obviously ramps up to Q2, Q3 and Q4, and that's what's in these numbers. But we're not assuming any big uptick from a volume standpoint until probably obviously get these initiatives implemented. And then we'll come back to -- the Street and obviously update -- the Street how we progressed.

And then I don't know, Brian, if you want to take the first one.

Listen, I would answer it a little more generally, which is, Vijay, I think we see a tremendous amount of opportunity in the market. it's not penetrated. Rather, we see with sites all of the time, more physicians that need the best technology. So we're extremely optimistic about the opportunities in front of us, not just with the new modalities like MSD, but just with our existing core business and therapy selection. So with our technology solutions, and we think the best technology solutions on the market, and we're super excited with Bobby's leadership to for more resources human capital programs, et cetera, behind this to support our cancer center clients as well as individual oncologists through educational programs, the MSL teams, et cetera, et cetera, as we go through this continued evolution in molecular information.

So we're just super excited. And with Bobby's leadership now, we can invest even more aggressively. So I think that's where this is coming from.

Our next question comes from the line of Doug Schenkel of Wolfe Research.

This is Colleen on for Doug. One on CapEx. We think we heard Luke mentioned $60 million in CapEx dedicated to the MSE launch this year. Can you just share any more color on how you plan to allocate that spend?

Yes, pretty evenly, Tether, Colleen, maybe a little bit more weighted, so like 35%, 25% first half, second half of the year. It will all depend on how quickly we can get their early detection ramped up. we're working very, very quickly on that right now. One of the key items from the CapEx standpoint is, obviously, our new Assure assay is going to be switched over to the Nova X. And Nova X is also what we're using for early detection.

So there's going to be additional Nova X machines that we'll purchase as well throughout the first half of this year and that we've already ordered -- so that's kind of how it's broken up. It's a lot related to testing equipment and then additional spend related to capacity and buildings.

All right. And then more broadly on capital deployment. Now that the business has demonstrated profitability and you have about $800 million on the balance sheet, how are you prioritizing incremental sales and marketing and R&D investment versus opportunities M&A? And are there any portfolio gaps you would look to fill strategically versus prioritizing smaller tuck-ins?

No. I think, look, we're always being very strategic in what we do. We have a great assay in-house. And obviously, we always focus on the technology first at Caris. So that's going to be a primary thing. But we remain strategic and obviously, the flexibility that we have based on our financial performance and the cash on hand, gives us an opportunity to just continue to assess. But we're going to push on all fronts, and then we'll see what actually shakes out.

Our next question comes from the line of Casey Woodring of JPMorgan.

Great. This is Sebastian on for Casey. Can you talk a little more about expectations for volume pacing? It sounds like you're not making any impact from new reps. I think you talked about mid-teens growth-ish for tissue and then something in the mid-30s for blood. Would you expect to grow above that in the first half and then below in the back half pending you ramp from new reps? And then just what's your expectation there for 1Q? And I have a quickfollow-up.

Yes, Sebastian. I probably you flipped that. So obviously, like we're continuing to ramp that up. What I said was when I think Dan asked the question was the tissue being like low teens, consistent with where Q4 was -- and then blood being in that high 50s. So like 59% is where we came in for Q4. So that's what's assumed in the guide. Now for Q1, obviously, you can see based on our historical performance, like you do have a little bit of push between Q1 and Q3 and then Q2 and Q4 pop. And you see that historically play out in our financials, just based on schedules, holidays, et cetera. So -- but I would think that as we ramp into the second half of the year, I feel very good about that 20% from an overall year standpoint.

Got it. And then just 1 on the [ MSA ] data you reported. So the interim data looks strong. I noticed apart from the top 3 or so indications, it looks like the sample size is pretty small. I guess, first off, do you think smaller sample size for some of these indications would impact how physicians and patients feel about -- are comfortable using the test? And then it looks like the breast sensitivity is well above peers and the sample size there is sufficiently large. So like is there any scenario where you would consider offering a stand-alone breast test in addition to [ MSA ]?

So yes, as you noted, the performance in breast is really, really good. And compared to like methylation-based tests that have single-digit sensitivities in early stage that shows a lot. But for us to go breast only kind of creates an ethical quandary because we wouldn't want to not report out when we find other cancers there. So -- the performance is really strong. And one of the reasons why the numbers are lower in some of those other categories is because not a lot of patients are found at early stage because there are no existing screening modalities that are very effective. And so -- we'll see that continue to play out over time where with our technology and our test, we will be the ones finding those early-stage cancers. And so those numbers will go up simply because we're -- we're now able to find them at the early stage.

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

Probably one for Luke. I think a little bit of a follow-up there. I just wanted to talk through what's baked into the guide for the new hires. How are you thinking about the pacing of hiring, how quickly they become productive and then is there anything for [ MSA ] in the numbers? Just wanted to talk through that.

Yes. So on the new hires, Patrick, effectively, we're trying to get everything done in the first half of the year, getting them hard as quickly as possible. So that's baked into kind of those views.

Yes, yes, yes. And on Yes.

Yes. So we have already posted all of the positions that we ramp up in the first phase. We've already started hiring 4 positions that have been posted already in 2026. We made this decision and announcement internally on January 6. And when we've been ramping up those new hires. We are also going to be ramping up hiring for [ MSA ] as a field-based sales force, along with the announcement that we had with the partnership with -- every well that we announced back in January. And so we're ramping up a multichannel approach in order to address both of those markets. And then we've also updated our training. Both how we internally get people up to speed in order to help physicians and patients with comprehensive genomic profiling with their current offering and set us up for our new launches.

That's helpful. I appreciate that. And then obviously, a lot of talk on [ MSD ]. Just quickly, I wanted to check on the MRD part of the portfolio. Any catalyst we can be looking out for time lines would be helpful.

We have to collect more data and part of that process is the maturing of clinical outcome data. So we don't -- we're not guiding to any time line on that front. Just have to keep accruing samples and outcome data.

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

Congrats on strong 2025. I did want to follow up on the [ MSE ] commentary. It's interesting you guys indicated that you do plan to to have a sales force for the [ MSA ] opportunity. Can you just give us a sense for -- by the end of '26 or the end of '27, can you give us a sense for sizing I think Garden is out there now with about 300 with plans to go to 600. I was just curious if you could give us maybe some type of a sense of what type of size you would want direct relative to some of your partners like Everly well?

Yes, I think a good question. I think as Luke mentioned, when we take a measured approach, we'll take a measured approach when we build out our [indiscernible] salesforce will start small, we know where to target. We've already had some collaboration discussions, and we'll take a measured approach as we get through the year and look at capacity and go through the launch.

Makes sense. And then 1 for David Spetzler. Can you give us a sense for timing on ACHIEVE-2 and maybe just the -- I don't know if it's 10,000 or 15,000 subjects, but just give us a sense of the size. And are there any particular bogeys that you're looking at either for Stage 1 or Stage 2 sensitivity.

So ACHIEVE-2 will be 25,000 total. A big part of that are precancerous components. So we'd really like to be able to characterize the performance of our test in patients that have polyps, for example. And that will be a big part of that cohort -- we still need to enroll probably 8,000 or so patients in order to hit that final number. But the flip side of that means that we have about 18,000 samples in-house now that we can start running.

So just like we did with ACHIEVE-1, we'll issue interim results as we get them and characterize that performance in these populations of patients where there's an opportunity to act before insurance in cancer. That's going to help bend that mortality curve massively.

And maybe just to clarify, are you able to launch Cares detect even absent the full readout of ACHIEVE-1? Or how are you thinking about the timing of that?

Yes. We're going to launch when we have the final readout on ACHIEVE-1. So ACHIEVE-1 is our final accuracy study that will enable launch.

Our next question comes from the line of Kyle Mikson of Cannacord Genuity.

Congrats on great year. On Caris [indiscernible] , I didn't -- I was trying to calculate PPV and some of the metrics here, it doesn't seem possible. data is pretty good. So I just wanted to ask if you could provide a little bit more color? I know it's in term, but still. And then just given datasolid, how does this validate the $3,500 price point? And what have folks like Everly will comment things like that. And honestly, how do you think about COGS getting lower over time to, I don't know if you said that in the past.

Yes. So -- you can't really calculate PPB because it's still a case control study, where it's about 1/3 cancer patients to 2/3 controls. And PPD is dependent upon the patient population and the incidence rate.

Mean in that high-risk setting, right, having a 7% undiagnosed cancer rate is pretty high, and that's indicative of that enrichment that we did. And so we can certainly I mean you can kind of use that 7% to address the PPD calculation if you want to. In terms of the price point, we don't think the 3,500 is that high at all, given the fact that this test actually works and nothing else out there is able to detect early-stage cancers. I mean we have introduced and are introducing a new technology that has a high cost to it because it works really, really well. And so from our perspective, this is really more about the death of inferior technologies like methylation and being replaced by superior technologies like full genome sequencing.

All right. It makes sense on the PPP and the case control everything. Final one, maybe for Luke, on the EBITDA lack of EBITDA guidance, which I guess makes sense. But if you take out the true-ups for in '25, yes, maybe a few million in adjusted EBITDA. What's the reasoning to not provide a more refined range for this year? Is that going to be [indiscernible] kind of investment or other pipeline spending anything else?

Yes. It's going to be all of the above effectively because we have a huge opportunity, not just we obviously achieve one, we're so excited about an early detection, which is going to be massive, but also just because we're able to prove the profitability thesis, we want to utilize that going in. So like you brought up the point of like 2025, like we had $136 million adjusted EBITDA. Even if you exclude the prior year stuff, it's still above $100 million adjusted EBITDA.

So I want to utilize that as we go into 2026, and that's kind of our focus. Now we are going to be diligent with that. We're not going to start burning like $250 million a year because we're in the position that we're in. but we're in a great position, and we're just going to use that. So I don't want to get tied down with guiding each quarter to a profitability metric.

I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Great. Welcome back from lunch, everyone. My name is Sebastian Sandler from the life science tools and diagnostics team at JPMorgan. I'm pleased to be joined by the Caris Life Sciences team. As usual, there will be 20 or so minutes presentation followed by Q&A.

And so with that, I'll kick it off to the team to get things going.

Great. Sebastian, thank you. I'm Brian Brille, I'm Vice Chairman of Caris Life Sciences. I'm joined by David Spetzler, who is our President; as well as Luke Power, our Chief Financial Officer. So Spetz and I were just commenting, we presented here for many years, but this is our first year as a publicly traded company. So thank you all very much who have supported us.

We went public, as you know, in June of last year, and I thought it was sort of appropriate to start by reflecting on sort of where we are. We thought that for us, 2025 was a very important year, a year of transformation in many respects for us. So with the IPO and with the new ASP, our financials are in a completely different situation. So we've ended the year with $800 million plus of cash. That's up about 5% actually through the quarter. We also are very strong from a P&L perspective.

So the ASP pricing that has gone through our P&L, I think it's important to note that, that has been driven by technology. and by a technology investment and decision, a strategic decision that we made many years ago to go to Whole Exome, Whole Transcriptome. So the pricing, both with respect to CMS as well as the private sector has followed that and has left us now with a P&L that's generating very strong cash flow, very strong profitability. And we think just given the opportunities that are inherent in this market and molecular information and profiling specifically, that gives us a huge edge. And we are going to use that edge. We're going to use that edge with respect to internal product development, further development of our channel, et cetera.

So the therapy selection business, our core business historically has been a real growth engine for us. The clinical case volumes have been consistent. The pricing has been moving up. So that core engine of growth gives us a lot of stability, confidence and position them to really focus on our product pipeline. So Spetz is going to talk about that. We're very excited about developments with respect to MSD and other product capabilities. And from the very beginning, we have been focused on more information is more power. That led us to the decision to go to Whole Exome, Whole Transcriptome that every patient has that. That's a core capability and a huge edge for us.

We talk about technology a lot. The market talks about technology a lot, but that doesn't get delivered without a platform. So we also have a -- what we think is a huge edge for us with respect to the scale of our platform, the distribution channel, et cetera. We completed about 200,000, just under 200,000 individual genomic profiles, individual patients last year, 199,300, 22% case volume for the year, all of which was with 23,000 genes, DNA and RNA. That put us past an important milestone, we think, of 1 million individual genomic profiles in our data set. And that was delivered through a distribution channel that's reaching now over 6,000 order oncologists.

So this data set, we think, is very special. The 678,000 transcriptome data set is the largest in the world. And across the 1 million profiles, about 75% of that is matched with clinical outcomes information. So we think this gives us a huge edge both with respect to internal product development as well as being a very attractive partner to academic medical centers as well as biopharma partners.

The market trends, we think, are fabulous as good, frankly, as they've ever been and getting better. So the TAM regardless of how you look at it or how you measure it, just with respect to therapy selection, the TAM is large. It's growing. It remains underpenetrated. Only about 1/3 of the patients are getting comprehensive genomic profiling defined by a 300 to 500 gene panel, let alone Whole Exome, Whole Transcriptome or beyond that. So there's much more work to do in terms of reaching all of the patients and supporting all of the physicians in the United States and more broadly to provide the best technology possible.

But the trends are very good. comprehensive genomic profile is clearly recognized as standard of care. The market is moving in that direction. So a lot of what we're doing is continuing to build our platform to reach as many individual oncologists as well as setting up precision oncology programs for the cancer centers.

There's a whole series of trends that are driving the senior leadership of cancer centers to have a need to set up real precision oncology programs, ranging from things like genomic metrics being incorporated as part of quality metrics for hospitals and cancer hospitals to the need for branding, attracting physicians, attracting patients, et cetera. So while we're providing a technology in a test we're much better understood as providing a strategic relationship and a service to the cancer center supporting them across the board in many different ways.

They generate through their clinical activity. They generate clinical outcomes. They're also very interested in combining that with the best genomic information possible. So the conversations we have with our partners are along the lines of Well, you're generating all of this data, you have an interest in this data for a whole variety of reasons, whether it's trials or research or whatever, why not have the best genomic information to combine with that clinical data as possible.

We get questions about internal labs from time to time. That has been -- internal labs have been out there for a while, and that's about roughly maybe 10% of the market, but the reality is that they're under pressure they don't have the competitive edges. They don't have the scale. And increasingly, these things are even more important. The investment necessary and the scale necessary to really deliver the best technology is such that these internal labs are looking for partners, and they're looking for partners like a Caris. So that trend has been in place in terms of outsourcing for quite a while, and we think will only grow more pronounced going forward.

So we've set up our channel and our go-to-market to match these trends. We have been focused on the patient-first philosophy, we call it, from the very beginning. We're a tech company. We're proud of that, but we're also a health care company, and our clients are obviously physicians and cancer centers, and they appreciate that, and they want they want the best technology, but they also want a company and a partner that is focused on the patient and understands the health care services business.

Our commercial platform, we think, is very talented. We have 250 people in the field, about 50 MSLs, PhDs that are field-based supporting our clients and wearing 2 hats in many respects. They're working side by side with the treating oncologists to help find the best treatment protocol find the best trial matching, but also, in many cases, doing research with those cancer centers as well. So it's a really interesting and powerful go-to-market fit for us.

Covering these institutions from both the individual oncologist bottoms-up perspective as well as top-down strategic perspective, we think, is critically important. We think we do that very well. It's been our strategy for some time. We have a dedicated team that covers the Cancer Center directors, deputies, et cetera, and that has been the team that's built the Precision Oncology Alliance, which is now up to 99 cancer centers across the United States and globally.

And you can see here, I mean, these logos, it's really -- I mean, it wasn't that long ago, Spetz, this page was not that populated, but it's grown dramatically, and we're very proud of it. These are all great institutions that are very proud to do research with us to use us as their precision oncology partner in many different ways. We added in the last quarter, 2 sites, Swedish in Seattle, part of the Providence network. They also have the Paul Allen Cancer Research Center, which is really interesting. So we're very excited about what we're able to do with these folks going forward. We also added Arkansas. And together, all of these 99 sites represent and incorporate about 4,000 medical oncologists or about 40% of the overall market.

So this growth has been very consistent actually over the past number of years. We're at 99 now. Full penetration is probably in the 120-ish range. We're not managing anymore to a particular number. But these top of the house strategic relationships give us the opportunity then going forward that we think to have more in-depth conversations to really penetrate the relationship broadly across all of the different departments and up and down the ore chart of these cancer centers.

One of the things we do is we publish with them. They love this. We love it. It's just a great synergy. We're now at over 1,200 publications that we've done jointly with our partners. The channel itself is tailored for the different market segments. I think it's important to note that on the one hand, the market is described as 80% community, but it doesn't operationally fall into that category. So many of the community docs are in an institutional format. So the academic centers all have networks for the most part, and that's about 1/3 of the market.

The corporate PPMs or Physician Practice Management companies like U.S. Oncology and others, those are community sites, but they're organized in a corporate format. And so 2/3 of the market is really institutional and involves institutional senior level decisions. And our go-to-market is structured that way. We have a very talented team of senior people who cover them from the perspective of the cancer center as well as the sales force that covers the individual physicians.

You can see on the lower right here, our sales force has been relatively flat over the past few years, while we've doubled volumes. But with the financial position that we're currently in, we feel like we're in a really unique position to grow, add capabilities here. And I think Luke will talk about this. We're going to definitely be investing in our sales force to broaden the reach, get to more cancer centers, more individual physicians and to be able to do more with our client base.

So I mentioned, we profiled just under 200,000. In 2025, we did 52,700 for the fourth quarter. That's 20% year-over-year growth, 22% growth for the year. And we're just -- we're very bullish right now. We think we're in a situation where we will see accelerating growth. We think the market is there in terms of the TAM, the underpenetration of it, and also, importantly, our positioning in our edges to go after those opportunities in the market. And they range from technology leadership, which Spetz in a minute will go into depth on our product pipeline. We're super excited about that.

Our channel is very differentiated, strong relationships, growing all the time. And as I mentioned, I think we're going to invest in this. And our financial profile, we did $281 million of revenues in the fourth quarter, reflecting 116% year-over-year growth. and our cash position is very strong at $800 million and going up.

So with all of that, I'll turn it over to Dr. Spetzler to go through our products and pipeline.

Thanks, Brian. Yes. So I get the fun part to talk about all the new and exciting stuff that we're doing. So an update on our multi-cancer early detection activities. So we had talked about ACHIEVE 1 which is our first validation study of our MSD. So the enrollment there is complete, and we'll be reading that out towards the end of this quarter. We're processing the samples as we speak and have finished about 30% of them just over that.

So the initial results are incredibly promising. This is using a whole genome approach. It is the deepest sequencing of the whole genome that we've ever heard about. So the amount of information that we're getting from this approach is really amazing and quite fantastic. So we're super, super excited about multi-cancer early detection, specifically making sure that we don't leave patient populations behind.

So one of the core attributes of Caris is we want to build the best tests possible, and we don't necessarily care how much they cost in the beginning. We want to maximize the biological information that we're generating for patients, and this approach is doing that in spades. And so we're very excited about that approach.

We've been concurrently enrolling patients in ACHIEVE 2. So that will be our second major study. And we added just under 3,000 patients in the last quarter to that study. And so we've got another 6,500 or so patients to enroll in that one. And so we will read out towards the end of this year, and we're very, very excited about that.

In addition to advancing the science, as we announced this morning, we have our first commercial partner to enable access to our MSD. So we've partnered with Everlywell, who has a pretty substantial reach, serviced over 60 million customers to date. And so this is a mechanism by which people will be able to get access to the amazing technology that we've developed to allow them to find out if they have a cancer that they need to deal with.

And so we're very excited about that, and we'll be commercially launching this as soon as we've achieved one readout, which we're very, very excited about, as I said. Price point is $3,500. So as I said, it's not necessarily a cheap test, but that's because we're not aiming towards minimizing the cost. We're aiming to maximize the performance. We are at a point in the development of MSD, where we should be focused on the science and building the best possible test, and we'll bring the cost down later on.

Another exciting aspect and new product is Caris ChromaSeek. So this is a whole -- sorry, Whole Genome and Whole Transcriptome technology. So this is taking the same fundamental technology that we used in our FDA product and now expanding it beyond the exome to the entire genome for hematological malignancies. And so we've completed the validation of this product, and it is currently under review by MolDX, and we will be launching it imminently as soon as we have finished that technical assessment with MolDX.

But similar to our MSD, this is a deeper whole genome than we've ever seen anybody else do. So again, trying to maximize the amount of information per patient -- and it's really extraordinary. And that's a kind of a the same thing that a with Whole Exome, Whole Transcriptome looking into the future.

We know that whole genome is going to be there. And so we want to start to build that database now early on so that we can take advantage of the information in terms of new product development and new insights as time goes on, because we all know that sequencing capacity will continue to improve, prices will come down, it's really taking advantage of that patient sample. That's the most precious thing in the entire workflow. And getting that information now gives us a significant edge and advantage.

Another one that we announced at San Antonio Breast Concert is MI Clarity, Caris MI Clarity. So this is an assay that is the first of its kind in a very unique way. in terms of incorporating true multimodal data. So we're using AI applied to both the H&E image as well as to the DNA and RNA results coming out of my cancer seek. With all of that information, we're able to ascertain the likelihood of a woman having a recurrence event after curative intent surgery. So there are already tests on the market to try to service this but it's fairly old technology.

And so we were able to acquire the samples that were used to validate those other tests and use those exact same samples and the validation of our test and see substantially improved performance. And so there are still too many women that can have a recurrence that should be going on adjuvant chemotherapy post-surgery that are not going on it. Just as likely and even maybe more important are women that are going on adjuvant chemotherapy that don't need it. And so with this one test, we're able to identify those patients that have a high likelihood of both short-term early recurrence and long-term distance recurrence.

And so in one test, you know what to do initially after surgery in terms of the adjuvant chemotherapy, but you also know what to do after 5 years in terms of extended endocrine therapy. And so we're very excited about this one because it truly starts to bring AI to the forefront, utilizing that both in the image and the genomic data simultaneously.

So with respect to minimal residual disease and MRD, so we've got the tissue-naive approach that we talked about before, going through that reimbursement pathway but we're also then launching a whole genome-based tissue-informed MRD as well. And so this is utilizing that genome platform that we've created, both for MSD and for hematological malignancies, using that to find trackers, and we're maximizing the number of trackers to have a super ultrasensitive assay, and we're looking forward to that as well.

Our plan there is to go pan tumor and to make it available to also Stage 1 patients. So there's an opportunity to understand the progression of disease, and that understanding shouldn't start at Stage 2. It should start at Stage 1 and ideally even earlier than that. And so again, maximizing the amount of information is part of our fundamental philosophy, and we'll be doing that with our MRD approach as well.

And then just a couple of updates on the BD side of things. So we announced the closure of a Caris Discovery project with Genentech with an upfront milestone payment of $20 million and a total contract value of over $1 billion. And so we're very excited with this Genentech makes amazing drugs and leveraging the data that we have and the technical capabilities that we have to find new targets and new opportunities to patients is how we're going to start to bend the bar even more in terms of helping patients survive. And so this is another one in a long series of strategic partnerships to identify new drug targets and it's the biggest one to date. And so we're very excited about this. and helping patients live longer.

With that, I'll turn it over to Luke to cover our financials.

Thanks, David. So a lot of these numbers that I'll go through were obviously in our earnings release this morning. One of the key things for us going into 2025 was obviously proving out the profitability thesis, and we obviously succeeded in that substantially. And I think one of the key things, obviously, from a growth standpoint, getting to $281 million, even though it includes true-ups, a lot of those true-ups were related to 2025, which is what we called out in our earnings release. So again, the power of the ASP, but also the power of the volume.

One of the key things for us is, obviously, we're very upfront about what we disclosed from a volume standpoint from tissue and blood. But currently, it is only therapy selection. I think one of the key things for us as we progress into 2026 is obviously getting through the pipe that Dr. Spetzler talked about today. And the key focus for us is obviously the first half of the year with early detection.

David Halbert has been pushing this since he formed Caris. It's a transformational technology, and that's why we want to get it out there as soon as possible. And that's why we're pursuing the self-pay path. It's the quickest path for us. And to David's point, I'm in a unique position as a CFO. Our CEO will never talk to me a cost like he's always wants the best technology. It's why we went to Whole Exome, Whole Transcriptome before we had reimbursement. It was the best thing to do for the patient, and we're going to continue along that path with the pipe. Like even with Whole Genome, reimbursement is going to take a little longer to catch up but we believe it will.

And you'll see this in others in our space, too, you're going to see the expansion trying to catch up. We went the Whole exome, Whole Transcriptome back in 2018, 2019 because it was the right thing to do. We're doing that now with whole genome for early detection. And I think that's going to be our next kind of accelerator or catalysts as we go forward, and we find more and more data that no one's seen before.

So from a performance, financial performance, obviously, the ASP has been fantastic. We definitely think there's room for growth there. there is insurance payers out there that their medical policies. We would like for them to be updated. You should not be denying coverage for molecular profiling at this stage. But I think as we grow we'll get that message across. And not just us, obviously, everyone across the industry is going to keep pushing insurance to obviously get their policies updated.

So from an overall performance standpoint from a financial performance, having $800 million of cash, we're going to use that going into 2026. One of the key things that we're going to focus on, obviously, along with the pipeline, is we're going to be expanding our commercial org. One of the things that we've done really good over the last couple of years has been kind of capital efficient. And we're going to maintain that, but we definitely think there's room for growth across our commercial org in that kind of 20% to 25% increase in headcount. So that's kind of the key focus going into the first 6 months of the year, along with getting early detection launched.

From a revenue performance standpoint. Obviously, one of the key things we discussed during our road show, we've always been clinically focused. That's what the company was set up to do. We have the mom rule, treat every patient that is if it's your mom. And that's always been our kind of key revenue generator, and that continued into 2025. Obviously, from a pharma standpoint, that's been kind of second for us. But what we're going to do in 2026, along with a commercial for the molecular profiling business unit, we're going to expand our pharma team quite drastically because again, we've proven the profitability thesis. Now we're going to drive the growth for '26 and beyond.

So even though pharma was down year-over-year, one of the key things, and David touched on Genentech, like we signed that deal late in Q4, so there was no revenue in Q4 related to that. So that goes into our pipe for 2026. We also have a couple of more deals that we're very close to finalizing that will continue to kind of drive that pharma growth up. And I feel very confident about that going into 2026.

From a molecular profiling services, obviously, the performance speaks for itself. From a therapy selection volume standpoint to 22%. Obviously, 20% in Q4 was a step-up from the 18% we had in Q3. So I was happy with that. I think what we're going to do with our sales are going forward, we can definitely drive that more along with medical policies and along with our, obviously, education out there, I definitely think there's room for improvement there. Again, you'll never hear me guide to it because I'm that type of CFO, but I definitely think we're in the right place to start 2026.

And then the last thing I'll touch on is ASP. Obviously, there's a lot of questions out there about our true-ups. So the bulk of our true-ups were actually from cases this year. when we actually launch a new product, we'd like to give it about 6 months before we actually start stepping up our ASP because we want to see the history from the payers. So that's what occurred in 2025. And we had about $135 million of true-ups, but $102 million were related to 2025.

So the true revenue number that you're looking at and what we actually recorded for Q4 -- again, these are all preliminary numbers. They're not audited. But our Q4 tissue base ASP was $3,800, which again was a good step up from $3,500 in Q3. And then also for blood, we stepped up $2,500, which had the benefit of obviously what we're doing with our tissue business getting more and more contracts signed for blood. So we feel very good about our profitability and where we're at today.

Now that being said, I will never guide to a profitability metric, we're not at that stage of our journey. I definitely think as we push towards growth, that's going to be our #1 focus and will be for the next kind of 2 to 3 years at least. And going back to what David Halbert has always told me, like we have a technology that we're going to focus on, and that's going to be the driver of the company going forward. It's going to be transformational. And that's why David Spetzler, Brian and I are so excited for '26, even though 2025 was obviously a fantastic year for us.

So I'll stop there and open it up to questions.

Great. Great. Maybe just jumping right into it. So you preannounced 4Q top line results above the Street, driven in part by case volume and then laterally from ASP with some of the true-ups you called out. So maybe digging into case volume, particularly for Caris Assure. Can you just unpack for us how that launch has trended relative to your initial expectations? Where are you seeing the best traction? Where are you seeing opportunities for improved uptake?

I think you'll see opportunities across the board, to be honest. Like, obviously, we've been very upfront and we're working on our next version that's going to go to New York State, and it's going to go to the FDA. And that's something that hopefully we'll obviously be working on to complete in 2026. So that will be the next catalyst there. I think from an overall trajectory standpoint, obviously, based on what we discussed during kind of we're probably like a quarter or 2 ahead of where we were kind of expecting. So we are seeing uptick there.

We got to like 8,500 cases. We're kind of expecting the 8,000 cases for Q4. So I definitely think, as we go forward, we should be growing there more substantially from a growth rate than our tissue business, which is obviously our legacy business. And I definitely think there's a huge opportunity there because obviously, blood is a lot easier to get than tissue. And also you have the opportunity to go and do multiple tests with blood. And that's why we're excited, not just for, obviously, our therapy selection business, but also like MRD and then early detection, you're going to have multiple tests per patient.

Yes. Great. You brought up the New York state approval. Can you walk through the latest timing on that? And then assuming that maybe falls in 2026, how that could translate to volume growth? I think tissue is -- New York is one of your largest tissue states, so would expect some impact from that.

Yes. We try to avoid guidance on timing when it's outside of our control. So we just don't know how long New York State Department of Health will take in the review of our submission. But the submission is within our control, and we'll be getting that in as soon as possible.

Yes. And then from -- to answer the volume question, like your New York State is one of our biggest markets from a tissue standpoint. I definitely see -- we'll see uptick there. It's not going to be a hockey stick. It's not flipping a switch. I think there's going to be work and obviously, our commercial team will have to do the work like they've been doing in all the other states. So I definitely think there'll be upside there, but Again, it's not going to just be immediate flip.

Maybe moving to the tissue side of things. So you called out some of the sales rep dynamics and the head count coming down since 2024. With less field reps, you can imagine there might be less interaction. So how should we think about the impact of this head count reduction to volumes? And then looking ahead, it sounds like that's an area of investment that you're focusing on. So where would you like to grow head count to? And then just generally, what is your framework for balancing volume growth and profitability moving forward?

Yes. So it's kind of funny and David has always warned me about this about becoming a public company CFO like when we were private, obviously, you're burning money. We were being very capital efficient, and that was kind of a natural attrition getting down to the $250 million. We didn't do any reduction in first. It was more just a natural attrition because every investor was telling us like stop burning and now we've turned that corner and it's, okay, don't worry about burning. So what we're focused on going forward, obviously, from a sales standpoint, with the profitability and with obviously the ASP turn, they're going to generate a lot more return on the investment than what we've experienced in the past.

And that's one of the reasons why we're focused on that 20% to 25% increase in head count from a commercial sales org. We definitely think it'll have a quicker return on our investment. So that's kind of where we're looking at. from that standpoint. And I think as we go forward, like, again, we're always going to be capital efficient. It's just our nature. And we're always going to look for being the most efficient from operating business. Obviously, David has demonstrated that historically based on these previous public companies.

So I think as we progress into 2026, it's more just runway for us. Like we're in a great position with the $800 million of cash on hand, like we're not going to burn from my management standpoint, if I'm not burning, I'm okay. So I'm not going to try and maintain getting to an EBITDA of 20% margin or 30%. I just want to continue to push on the technology that David Spetzler is very excited about, and David Halbert is very excited about, and the #1 investment, net investment then is building out the commercial platform because we have a lot of great relationships that Brian touched on with our POA definitely that we can expand and we can expand the reach to more patients actually get access to our testing.

Great. Maybe let's move to the pipeline, which has been an investor focus. So during the 3Q call, you introduced the ACHIEVE trials and provided some helpful details there during your presentation. Can you just talk more about how long these trials were in the works, more about where Caris gather the samples and then any partners or investigators that are involved in worth calling out?

They've been in the works for multiple years. So we have, I don't know, 30-odd sites that we're collecting samples from and enrolling patients in. So we've never been the type of company that is flashy in terms of saying all the stuff. We just keep our heads down and do the work. And now that work is almost done, and so that's why we're talking about it.

Great. Maybe moving to MSD. So you're targeting launch in the first half of this year, targeting cash pay patients. Can you talk more about how you envision this market taking shape for tariffs and the strategy around convincing providers and patients that whole genome is the best test method? And then maybe, Luke, can you touch on any color on the target gross margin for this test at the target price of $3,500?

Yes. So the technology really needs to be measured by your Stage 1 and Stage 2 sensitivity at appropriate specificity. And so the key here is that if you start to look at what are the most common Stage 1 cancers that are out there; it's breast cancer, it's prostate cancer, it's lung cancer, it's colon cancer. So those are tests where there are already screens, but the screens are not that effective. I mean the fundamental sensitivity specificity of mammography is about 60% and 80%. And we use that as our standard of care, but that's a really low bar.

And so as you're developing a multi-cancer early detection, the keyword there is early. So it's got to be focused on that Stage 1 and Stage 2 performance, and we can't miss the most common cancers. We don't want to miss 97% of breast cancer, stage 1 breast cancer and of stage prostate cancer. We want to catch as many of those as possible. So the technology at the end of the day, have to match the biology. And those 2 cancers are unique because they're hormonally driven cancers. And so if you're looking for methylation changes, there's a reason why you're not finding them in those cancers because those cancers aren't driven by methylation changes.

And so the whole point of the technology should be to identify and go after the biology. So the technology is just the tool and the biology is the source of the problem. And what we need to do is maximize that Stage 1 performance because that's when we can truly cure cancer. That's when we can have a really significant impact. And when you achieve that, then you're talking about the entire world is your TAM. And that's why it's so exciting is because this isn't just a disease that is specific to one patient population. This is everybody on the planet. And at the end of the day, when you start to think about the nature of disease, it's cells going wrong. And if the cell is going wrong, there's something in the molecular system that's gone wrong.

And so by doing this approach by measuring everything we possibly can, we're not only going to have great insight into cancer, we're going to have great insight into everything else as well. And so this is the platform by which we start to change all medicine. At the end of the day, if you can catch a disease early, then you can do something about it before it's symptomatic before it's always caused all the other systems within our bodies to fail. And that's why we're so excited about this approach. I mean whole genome wasn't possible even a few years ago at the scale that needs to be done at the depth that it needs to be done to start to deconvolute the biology.

But now, it is. And so we're at the beginning of an incredibly exciting journey, not just in oncology but in every other chronic disease as well. So that's why we don't care about the price or the ASP because now this is the beginning of a technological revolution, and we don't want to slow it down by underinvesting. We're just going to go for it. That's what we've always done, and that's what we're going to continue to do.

Yes. And to answer the question from a gross margin standpoint, Spetz obviously touched on it or doing this the like an incredible depth for Whole Genome. So it's a very expensive test. So the $3,500 price, like that's not a 60%, 70% gross margin product, but it's not a negative gross margin product. And because of the position we're in, and this is one of the unique things about Caris, is we're more focused on the technology now that we've proven kind of the profitability side of the business. So launching something and get something out to the masses, that's a neutral gross margin, I'm okay with that because we want to get the technology out there as soon as possible.

Now, again, in 3 years' time, 4 years' time, it's similar to what we have experienced with our tissue assay. When we launched Whole Exome, Whole Transcriptome, there wasn't the NovaSeq, there wasn't an X, and that caught up. It's the same thing that's going to happen here. We just want to focus on technology first and then the cost and everything will come years later when sequencing improves.

Great. Maybe one on MRD on the tissue free side. So you submitted the technical assessment to MolDX. Can you walk us through how any conversations there have been progressing when could we potentially see some top line impact from that if everything goes as planned? And then do you need to wait on any data from ACHIEVE 2 for reimbursement there? Or just any other dynamics on data collection?

Yes. So we owe MolDX some more data. They've given us some feedback, and we're preparing data, additional data to submit to them. We do not have to wait for ACHIEVE 1. ACHIEVE 1 will be sufficient for us to launch that completes our validation. That is our accuracy study. So in addition to accuracy, of course, we have all the other studies, limited detection, mass input, precision interfering substances. And as soon as we finished all of them, then we are prepared to commercially launch.

Great. Maybe moving to Pharma R&D Services. I think, Luke, you talked about maybe adding some head count there, talked about some potential partnerships in the pipeline. Can you talk about whether these partnerships fall more in the discovery side, data licensing, the profiling services and then where this head count is going and how you see that business taking shape in '26?

Yes. I think we're very excited about it. It's going to be across all 3 pillars, to be honest. So obviously get our tissue FDA approval like we should be expanding our CDx platform. And that's a couple of the deals that we're working through right now that hopefully will material in the first half of the year. From a data perspective, again, we were late to the game because that's not been our focus. It's always been more clinically focused and focusing on the technology. But with that 1 million profiles and obviously, the majority of those being Whole Exome, Whole Transcriptome, we believe we have a great platform that can help others develop new drugs or develop new targets based on utilizing our data.

So we're working across all 3 pillars. So that's where we expect to see the growth from. Obviously, from a financial metric standpoint, the data business is the higher gross margin product. because, again, we made the commitment to run Whole Exome, Whole transcript through our clinical business. So that's already embedded in our gross margin. But I think across the board is where we should expect it, and it's the same with the headcount. It's going to be across the 3 pillars.

Great. Maybe going back to molecular profiling on ASPs, which were very strong in 4Q, some trips there, but still extra stepped up nicely. Can you just talk about how negotiations there are progressing with commercial payers like where are typical rates in around that Medicare price of $8,455. And then I think during the 3Q earnings call, David Halbert, put out a target of around $4,000 in the first half of this year. So any updated view on that target? And just the level of visibility there would be helpful.

Yes, I think I was the one that said that. I don't want David talking about ASP, I want to focusing on the technology. Yes. From that standpoint, I feel like we're in a great place there. Our market is teams and our billing teams have done a fantastic job over the last kind of 12 to 18 months, just getting prepared for when we got the FDA approval. So that's why you saw that kind of quicker-than-expected uptick.

I think from my standpoint, one of the key things we've been able to communicate with payers is the comprehensive approach. So a lot of companies out there will run DNA, they run RNA separately. They will run other tests separately and they bill separately. This is one complete Whole Exome, Whole Transcriptome and that's one bill that we're sending to them.

And we also include and we don't charge for our AI signatures on top. And one of those signatures is -- oh, I have to wrap up. One of the signatures, GPS, which if you were to charge for that separately, it's about $3,500. So they're starting to see that when we explain it to them that this is actually better for you in the long run by getting one test, one bill and it's the most comprehensive that you don't go back and do multiple tests after.

Great. I think with that, we're out of time. So thank you to the Caris team. Thank you all for coming. Enjoy the rest of the conference.

Thank you.

Good afternoon, everyone, and welcome to the Caris Life Sciences Third Quarter 2025 Earnings Call. My name is Shannon, and I will be your coordinator today. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Russ Denton at Caris. Please go ahead.

Thank you. Earlier today, Caris Life Sciences released financial results for the quarter ended September 30, 2025. Joining from Caris today, David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; and Luke Power, our CFO.

Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our prospective filed with the SEC in connection with our IPO and our quarterly report on Form 10-Q to be filed with the SEC.

Except as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise. The information in this conference call is accurate only as of the live broadcast.

This call also includes a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today. A copy of today's presentation materials can be found on our Investor Relations website.

I will now turn the call over to David Dean Albert.

Thanks, Russ. Good afternoon, everyone. Before the team walks through our exceptional financial results for the third quarter, I want to take a moment to speak about something even more important. The foundation that makes these results possible and the vision that continues to drive Caris forward.

When I founded Caris, my goal was simple: to make a precision medicine a reality. Our only purpose is to help patients live longer and have a better quality of life by applying personalized medicine to disease. In 2018, I made the decision to move Caris to whole life zone and whole transcriptome sequencing. It was a bold move at the time, but I believe it was the only path forward. That decision put us at the forefront of precision medicine, where we've remained ever since.

17 years in, I can say with confidence that the mission has only grown stronger. The power of our whole exome and whole transcriptome platforms across both tissue and blood has exceeded my expectations. The data that we have generated from these platforms, utilizing the cloud and AI lays the groundwork for what comes next.

The next step is what excites me most I believe that in the not-so-distant future, the work we're doing today will move medicine beyond diagnostics and treatment into true prediction and prevention. We'll be hearing a world where we can anticipate disease before it begins and intervene before it ever has a chance to form.

I've referred to this concept as the cleanse, personalized disease prevention, where we could 1 day identify and eliminate pathogenic mutations before they ever become disease. In pursuit of this vision and to expand our current platform, I made the decision to incorporate whole genome sequencing into our early detection test. It's another step forward as you consider whole exome to be the highlight reel whole genome as the full movie.

And now as we stand at the intersection of balance and technology, the possibilities are accelerating faster than I imagined. The rapid advancements in artificial intelligence, the exposure of data and sequencing and the evolution of how data is analyzed and consumed are transforming what's possible. What began as a vision to make precision medicine a reality is happening, including a platform that we believe will redefine how we understand, predict and ultimately prevent disease. This is the future we've built toward from the very beginning, and I'm excited to continue on this incredible mission.

Thanks, David, and thank you all for joining our third quarter 2025 earnings call. This is our second call as a public company following our June IPO. As David mentioned, we're pleased to report another record-breaking quarter, one that marks the significant milestone in Caris history in terms of continued growth and underlying profitability. We've had an outstanding third quarter with total revenues increasing 113% year-over-year to $216.8 million.

As shown on Slide 3, this result was driven primarily by strong performance from clinical profile. Molecular profiling services revenues increased to $207.6 million, representing an increase of over 121% year-over-year. And pharma R&D services revenues increased to $9.2 million an increase of 18.3% year-over-year.

On Slide 4, with respect to molecular profiling revenue, you can see the remarkable increase of 121% which was driven by consistent growth in clinical case volumes as well as very strong growth in clinical ASP.

Clinical case volumes were slightly less than 51,000 individual profiles representing growth of 18.2% year-over-year, in line with our expectations. Caris assure for therapy selection continues to gain market share and produced 66% year-over-year case volume growth in the third quarter, which is an increase from the 56% year-over-year growth in the second quarter of this year.

In addition, ASP increased to $4.89 per profile for growth of 87% year-over-year. This represents important sequential improvement from the $3,256 per profile in the second quarter. As you may recall, this is primarily due to the new CMS rate of $8,455, which took effect retroactively through November 5 last year, the date of MI cancer seeks FDA approval.

This mix shift to MI cancer see has driven the increase and we've also made further progress with private payers. It also includes some over collections and true-ups relating to prior period cases, which Luke will discuss in more detail later.

In summary, across the board, we've had a very productive third quarter, illustrated by the highlights on Slide 5. The strong revenue performance, combined with the operating leverage inherent in our business model has produced significant margin improvement. And specifically, gross margins improved significantly to 68%, up from 43.7% in the third quarter of last year. It also represents a significant sequential move up from the 62.7% in the second quarter. This was driven by several factors, including strong overall revenue growth as well as lab and other operational efficiencies.

In fact, with this gross margin improvement, we have successfully achieved another major milestone in our path to profitability. And this quarter, we generated positive adjusted EBITDA of $51.2 million and net income of $24.3 million as well as positive free cash flow of $55.3 million. Together, the strong profitability profile provides valuable flexibility for ongoing investment in our technology platform for new products as well as the ability to develop new channels such as multi-cancer early detection. Luke will expand further on these important developments and our philosophy for strategic investment.

In addition, our balance sheet continues to strengthen and due to our cash flow performance, our cash on hand grew to a little under $760 million, an increase of 4.7% sequentially. This continues to provide us with important strategic flexibility for ongoing investment to develop Caris' extraordinary opportunities in MRD, monitoring, early detection and other markets as well.

Slide 6 illustrates the consistent and systematic growth that our team has generated in clinical profile over many years. We've grown clinical case volumes at a CAGR of 28% over the past 5 years and this growth rate has continued in the first 9 months of 2025 at 23.4% growth year-over-year. The sustained case volume growth reflects several factors.

First, the unparalleled breadth and depth of our whole exome hold transcriptome assay technology, 23,000 genes DNA and RNA continues to resonate with oncologists, KOLs and cancer center leadership. In addition, our differentiated coverage strategy as well as research orientation and the Caris Precision Oncology Alliance provides us a competitive edge in the market.

Finally, we believe that the therapy selection TAM continues to expand with new indications as well as ASP growth. And most importantly, we believe that the penetration rate for comprehensive genomic profiling remains relatively low at about 30% or so, providing us with growth opportunities to serve more physicians and patients with superior technology over many years.

We also benefit from strong operating leverage associated with our established distribution channel, seasoned sales force and strategic relationships at both the institutional and the individual oncologist level. We are now consistently reaching approximately 6,000 oncologists across the country. In addition, there are other technological efficiencies such as EHR integration, which will further enhance the pipe connectivity with our clinical client base and facilitated case volumes.

For instance, we are now EHR-integrated with approximately 2,800 clinical sites and over 65% of our orders come in electronically. As you can see on Slide 7, the Caris data set has continued to grow with our clinical profiling activity and now exceeds 959 genetic -- profiles and 660,000 match profiles. Since every profile has been generated with our whole exome whole transcriptome technology for many years, our data set features 577,000 exomes and 628,000 transcriptomes. This gives our data set tremendous power for our own internal product development and continues to enhance our attractiveness as a preferred research partner for academic medical centers as well as biopharma.

We continue to work with potential new partners for the Precision Oncology Alliance, and given the size and breadth that we currently cover, we're being very strategic about adding additional sites. We have important opportunities across the existing 97 sites for deepening relationship penetration and adding new modalities across the continuum of care. As communicated previously, the POA members benefit from access to our CodeAI genomic data set as well as the opportunity to publish with us and the POA collaboration has produced a cumulative total of over 1,150 peer-reviewed publications reflected on Slide 8.

In conclusion, we are very pleased with this latest quarter's performance and the demonstration of sustainable growth profitable business model and a very exciting future.

I'll now turn the presentation over to Dr. Spetzler to discuss our progress on our product pipeline. Spetz?

Thanks, Brian. I will begin by giving a quick update on our MRD CRC solution on Slide 9. We are working to obtain reimbursement on Caris Assure MRD colorectal. The data we submitted includes over 100 patient samples evaluated on the whole exome and full transcriptome caricature platform, incorporating our PPM gene expression in AI-based signature.

As part of our submission, we also compared our performance to that of a commonly used third-party MRD assay in colorectal cancer. Samples tested within 60 days of one another. Among these cases, we demonstrated 96.3% positive percent agreement and 100% negative percent agreement. The disease-free survival curve on the right shows that patients identified as likely to recur, experience shorter disease-free survival, while those predicted as no event remain disease-free for extended periods.

The separation between these groups with a p-value less than 0.005, supports the test's ability to accurately distinguish recurrence risk.

Using the ABCD AI, M&M AI and PMOT scores, we demonstrated consistent signal detection and strong correlation with known molecular and clinical features. This data supports our belief that MRD detection grounded in whole exome and transcriptome data can capture a broader molecular landscape and offer deeper insights into tumor biology.

In addition to our MRD colorectal, we continue to make progress on other solutions in our pipeline and expect to finalize these additional solutions for submission shortly. These are reflected on Slide 10.

The first is Caris Chroma Seed which is our therapy selection offering within the hematological malignancies cancer space, including AML, MDS and MPN as well as suspected myeloid malignancies where other causes have been ruled out. As communicated previously, this approach utilizes both whole genome and whole transcriptome sequencing, and the solution provides more than 200 except of coverage of the genome and approximately 1.6 billion reads per patient, enabling detection of mutations, fusion, copy number changes, expression employ across the genome.

The second submission expected is for MI clarity, which focuses on patients with breast cancer who are ER positive and HER2 negative, typically lymph non-negative or with limited nodal involvement primarily in Stage 1 or Stage 2 disease. MI clarity combines our tissue platform and digital AI analytics to produce both early and late return scores, designed to inform individualized treatment and monitoring strategies, and we believe this will offer superior performance to existing third-party offerings.

MI Clarity was developed and validated on samples from 2 large randomized controlled trials and results will be shared at a large upcoming international conference. We are very excited for these solutions and believe that they can continue to expand our unique approach to building out our suite of solutions in an efficient manner. Like our MRD colorectal submission, and as stated on previous calls, we will hold off on providing potential launch dates until we have made it through the expected rounds of feedback.

And then finally, I will give a brief update on our current study's progress. As reflected on Slide 11 on the early detection slide, our ACHIEVE I study is complete with enrollment of 3,000 subjects. ACHIEVE I, which is targeting 25,000 subjects, is well underway with over 15,600 patients already enrolled. That brings our combined total to more than 18,600 subjects across more than 40 different cancer types and normal controls. The ACHIEVE program remains the cornerstone of our early detection platform with particularly strong representation across normal and premalignant populations, over 14,000 normal subjects and more than 2,500 with advanced adenomas. This gives us a powerful data set to refine our assay performance and validate early signals across multiple tumor types.

David already touched on this, but we are incorporating whole genome into early detection and we will be utilizing the data set to provide the readouts and ACHIEVE I in the first half of 2026, utilizing the whole genome.

On the right side of the slide, you can see our MRD and monitoring portfolio. which now includes more than 3,300 subjects across a range of indications, which are currently undergoing contracting and enrollment. Enrollment is balanced across key solid tumors with the largest cohorts in non-small cell lung cancer, rectal and esophageal gastric cancers. The data generated from these efforts will feed directly into our development pipeline and commercial readiness planning.

As Brian mentioned earlier, we continue to believe that we are in the early innings of the potential for precision medicine and remain very excited for the impact that this will have not just on patients of today, but also those in the future. I will stop there and now pass it over to Luke for the financial updates. Luke?

Thanks, David. Brian mentioned some of these already within the highlights. And as you can see within our earnings release, we'll continue to provide a summary metric table. So I'll go through the next few slides relatively quickly. Turning to Slide 12. You can see we delivered another outstanding quarter with total revenue increasing 113% year-over-year, reflecting exceptional organic performance across the business. The main driver, as expected, was our molecular profiling business, which grew 121% compared to Q3 of last year.

Our molecular profiling business continues to perform at a high level, and therapy selection volumes were up 18% for the quarter and 23% year-to-date, right in line with our expectations for mid- to high teens growth in the second half of the year. And this is separate from any potential new solutions that David mentioned earlier around MRD, Caris Chroma Seq, MI Clarity and early detection. More importantly, this growth is showing up in the bottom line. We are seeing continued improved commercial reimbursement following our FDA approval for tissue and stronger-than-expected contracting for blood. These tailwinds drove gains in cash flow and adjusted EBITDA and have also delivered better-than-expected ASP across both tissue and blood solutions.

As Brian mentioned earlier, we also saw stronger-than-expected collections both on current and prior cases, and this resulted in a $37.9 million revenue true-up for the quarter. That true-up reflects increased payment activity from commercial payers and highlights the continued positive trend we have seen in reimbursement. And as we said before, as payer history continues to build, we expect these true-ups to become smaller over time, particularly post 9 to 12 months of launch. So even excluding that benefit, our underlying base ASP improved ahead of our expectations.

For tissue, we're now 10 months into the launch of our FDA-approved solution and are beginning to see steady, predictable patterns and this is reflected in the 3,500 base ASP for the third quarter and a little under 4,300 with the true-ups. We also still expect Q4 base ASP for tissue to be around 3,600 and with the third quarter performance, including the true-up, expected full year tissue ASP to be trending slightly above 3,400 for the year.

Within tissue, line cancer seed continues to remain 78% of the total tissue volume. And we surpassed a major milestone of 200 million covered lives for my Cancer seek, which includes governmental and commercial payers, and that's a direct result of the excellent execution by our market access team.

Switching to blood. Blood space, ASP reached [ $2,377 ] per case and with true-ups that exceeded $3,000 per day. Improved tissue contracting continues to have a positive impact on our blood ASP so we're raising Q4 guidance to be in the $2,300 to $2,400 per case range, which, along with the Q3 performance, we put us close to $2,500 per blood ASP for the full yearWithin blood, another great market trend continues to play out. And we saw that for Q3, where 40% of our blood cases also had a tissue case performed, which was up from the mid-30% range last quarter.

Turning briefly to pharma revenue. As expected, Revenue declined sequentially this quarter, several projects and associated customer spend shifted into Q4, which is a similar pattern we experienced last year. That said, Pharma revenue was still up 18% year-over-year, reaching $9.2 million. Pharma continues to remain a smaller part of our overall mix, but it's strategically important, and our focus remains on building longer-term partnerships on multiyear agreements rather than one-off projects.

Similar to prior year, we do expect sequential improvement as we move into the fourth quarter versus Q3 performance. These revenue numbers obviously had a very positive impact on our gross margin for the quarter, which was 68% and up from the 43.7% in the third quarter of 2024. And was the result of the continued excellent work by our labs teams and maintaining operating efficiencies with the increased volume, along with that ASP improvement.

In fact, one of the key milestones we achieved in Q3 was being able to get our turnaround time for tissue down to 8 days and blood at 7 days. Considering the sequencing requirements for our whole exome whole transcriptome solutions, this demonstrates the significant progress we are making on lab efficiencies and the excellent work by our teams.

We will also see this great trends on Slide 14, and we believe with the continued improvement in ASP and our updated revenue guidance, which I'll discuss a little bit that we should be getting to a 62% gross margin for the full year 2025. which would be an increase from the 43.4% that we had in 2024.

Moving down from an operating expense standpoint, we continue to demonstrate excellent operating leverage, and the 9% ramp year-over-year was primarily driven by an increase in stock-based compensation. We continue to look for efficiencies, not just with the emergence of AI and the potential impact that has on business processes. But also on our R&D efforts in which our efficiency efforts are supported by having 1 platform across the care continuum.

In fact, due to the improved performance we actually hit the milestone of not just having positive adjusted EBITDA, but also net income, which is our first in our 17-year history. The last item I will comment on from this slide before jumping to the guidance slide is free cash flow, up Q3 was obviously great in this regard as we achieved positive free cash flow for the quarter in the amount of $55.3 million. This performance continues to strengthen our balance sheet and allows us to build up some dry powder ahead of the new solutions David discussed earlier.

With regards to our investment approach, and as I've stated before, this continues to be opportunistic, and we're currently assessing opportunities for expansion in marketing and sales. along with assessing any external opportunities on the rise. The main goal for us financially continues to be not to -- or profits, but to focus on our mission, as David Halbert discussed at the start of the call.

And finally, jumping to Slide 15, I'll give a brief update on guidance. As previously communicated, we'll continue to provide guidance on the total revenue and expected clinical therapy selection volume basis. And with regards to these, given the excellent performance of Q3, we're upping our total revenue to be within the range of $720 million to $730 million for FY '25, which would be a 75% to 77% increase over 2024 and increasing our expectations for clinical therapy selection volume to be even a 21% to 22% over the year.

I will wrap up there. I will now turn it back over to the operator. Operator?

[Operator Instructions]. Our first question comes from the line of Vijay Kumar with Evercore ISI.

Maybe my first question on the performance here in the quarter. ASPs clearly came in about, what is your implied Q4 assuming I think revenues are down, I think, sequentially. So it doesn't include any true-ups in what was underlying gross margins in 3Q, excluding the true-ups?

Yes, Vijay. So yes, as I stated in Q2, we'll never forecast any potential true-ups because, again, we don't know those until the end of each quarter. So it's not assuming anything there. So for total revenue for Q4, our assumption in the guidance we put out is the $200 million to $210 million range for total revenue. So to answer your other question then, what was our underlying gross margin without the true-ups in Q3, that was about 61%, excluding that true-up that we had in Q3.

Understood. And then maybe one on the clinical side here, this colorectal MRD data that you're showing. Is this enough for you guys to submit to -- or what kind of data is needed if there's any additional data that's required, could you update us on when we could expect the data?

Yes. I'll take that one. It is enough data for us to submit. We don't know how they'll necessarily respond and what additional data that they will want. But we do have additional data ready and some of the studies that we listed are will be reported out soon.

And sorry, when you say this is enough to submit, have you submitted or are you planning to submit to the CMS?

We'd like to only talk about that after it's been approved because the process is complex and long.

Our next question comes from the line of Dan Brennan with TD Cowen.

Maybe just 1 more on price. If you don't mind. Just could you walk through a little bit of kind of the success on the underlying pricing ex the true-ups how you saw the progression in terms of payment rates against the [ 84.55 ] rate for on the tissue side? Like how are you doing versus expectation? Maybe just give a little color on the commercial success there in Q3 versus Q2 and same thing on Medicare and then kind of how are you thinking about, I think you said kind of price in that same ZIP code, the underlying price for 4Q. So just kind of what's assumed in 4Q, should we think about the underlying price and across Medicare and commercial?

Yes, Dan. So Effectively, what we're assuming for our base and is what I said in the presentation is about a base for tissue of 3,600 for Q4. Now we obviously think there's a possibility it might come in a little bit higher than that, but I'm being cautious in the guidance I'm putting out there until I get a little bit more history on the payments. By the time we get to the end of the year, we'll have about 9 months of payment histories from payers. And based on our historical experience, you're probably in that 9 to 12 months where you have like a very established trend.

So what we saw in Q3 happened and what we've seen throughout the year is actually the response we're seeing from commercial payers has been very, very, very good. So that's what's kind of driving it. And when we discussed I think it was in Q2 as well, like we have an underlying goal for ourselves, too, that we should be getting to an overall percentage of what the Medicare rate is for our overall SP and I think we're probably about a quarter ahead of where we thought we were going to be at the start of the third year. And again, that's due to the great work of the market access team and the billing team. So I think what we'll see going forward is trying to get above my next goal for a company in the next goal for obviously the market access team in the first half of next year is to try and get above a $4,000 ASP for tissue, and I think we can deliver on that.

Great. And then maybe just on the pipeline, just on early detection, you gave a lot of cover, David in terms of the ACHIEVE study. There's a lot of excitement in that space right now. Can you just kind of walk us through a little bit more of time lines? I think you said, what, ACHIEVE to 16,000 enrolled at even might like just kind of walk us through kind of how we think about the cadence of publications go to market? Like would you guys consider launching an LDT? Just how does that work and kind of the spending associated with that?

Yes. We'll read out ACHIEVE I in the first half of next year. The accrual rate on ACHIEVE II is pretty strong. So it's probably late next year or early in '27 when we'll read that one out. And we would consider an LDT launch for sure.

And that would be after Q2 you considered LDT launch?

No. Before, I think achieve one gets us where we need to be on that.

Our next question comes from the line of Michael Ryskin with Bank of America.

I want to dig into your volume guidance for the year. You bumped that up a little bit. You're looking at, I think, 21% to 22% for the year. Pretty good start of the year. It is a little bit of a conservative assumption for 4Q. But if I just look at the total volumes on a patient basis, you're kind of trending in that 50,000 to 51,000, 2Q, 3Q, 4Q. So as we think forward to next year just sort of beyond -- what gives you confidence you can kind of reaccelerate that and take a step function. Maybe just talk about the sequential versus the year-over-year growth? And how do we think about volumes progressing beyond the next couple of quarters? And I've got a follow-up.

Yes. Thanks, Mike. So yes, so for Q3, obviously, the 80% came in kind of in line with what we were expecting. And kind of the reason for that guide and kind of the actual results. We were actually pretty cognizant about this coming into the year is that Q3 last year was actually probably one of our highest quarters at 35%. So it was a very tough comp coming into the year, and we wanted to be careful setting expectations against that. Now as you mentioned, what we did with the updated guidance is we're increasing the higher range on that volume based on what we've seen play out later in the quarter. So we feel very good about being in that total 197,500 cases to 298,500 cases for the year as we sit here today. So then that would obviously get you in that kind of 22%.

You asked about what we think for next year, we're not going to release the guide right now because of what Brian mentioned on the call, and I'll leave Brian jump in, in a minute about the commercial pipe. We've seen kind of an uptick after the summer months. especially among ordering physicians and obviously, especially with our blood volume.

So one of the key things that we're working towards now for blood for Q4 is we got the 7,500 cases probably a quarter than we were anticipating earlier. So our expectation now is, okay, can we get above 8,000 cases for the quarter in Q4. And then once we have that, one of the other key catalysts for blood that we've obviously mentioned on the previous call, to is getting the New York State approval since we're not selling in New York right now. And I think that will obviously give another additional kick to the volume from blood.

So I think what we'll do at the end of the year, especially when we report that preliminary numbers and probably for JPMorgan, we'll put out a guide around what we expect our therapy selection volume to be.

Okay. All right. And then if I can get a follow-up. On the strong EBITDA number in the quarter, the free cash flow, I mean even if a good chunk of this was attributed to the true-up, clearly, you're moving to profitability and cash flow positive earlier than you expected. Can you talk about incremental spend priorities and just, again, how do you balance the profitability versus the opportunity to reinvest back in the business? Just want to get a sense of if things come through again on the top end, on the higher end, where that extra money will go.

Yes. Yes. And it's a great question because obviously, we're in a fantastic position financially right now. And obviously, that's why David Halbert said what he said at the start of the call, like we're going on to our next phase. And one of those phases is obviously doing whole genome for early detection. So there is going to be an increase in spend there.

Now for Q3, we did have kind of on the lower end of the previous range I put out for OpEx. It was like $114 million. Now I do expect for Q4 based on obviously starting to ACHIEVE 1 study and running whole genome for that. to be kind of in the higher $120 million for OpEx for Q4. So that's going to be some of the investment, too, of those kind of additional free cash flow that we have for Q3.

Then the other thing that I mentioned on the call, we're also assessing opportunities for the sales and marketing teams with additional spend there. We spend kind of a lot of time in Q3 just thinking about, okay, how do we want to be structured as we go forward with the new solutions that we have in our pipeline, along with our therapy selection. So there's going to be an increase in spend there as well. And then there's also external opportunities that we'll continue to assess.

Mike, it's Brian. The business model that we've built over a number of years, though gives us a tremendous amount of flexibility. So the numbers have kind of definitely come into their own with respect to profitability. And that's being driven by growth overall, but also by the operating leverage inherent in our business in both the tech platform which is set up in sort of this 1 assay format that's very, very powerful as well as the channel that we've built over many years.

So as you've mentioned before, our growth has sort of doubled over the past few years, while head count has been basically flat in the channel. So we benefit from very strong relationships, senior relationships at the top of the house with respect to cancer center leadership as well as individual physicians were up to 6,000 or so now ordering physicians.

So it's a very efficient business model that we think is well suited for ongoing profitable growth. So I think it gives us David Halbert directly as well as from a financial perspective to invest in the business. whether it's tweaking the sales force, as Luke was talking about, but also really leaning into what we think is a tremendous opportunity in early detection.

So it's not like we're going to have to make really tough decisions either way. I think this business model is going to support our strategic moves against what is, we think, just historic market opportunities. across the whole molecular information landscape.

Our next question comes from Doug Schenkel with Wolfe Research.

Starting on MRD. Once you have MALD-X coverage, what's the commercialization strategy to scale that business? And specifically, what I'm getting at is, can you go after it, get after it with your existing oncology sales force without material headcount expansion. And then relatedly, how should we think about initial pricing? Will that align with currently reimbursed tumor-naive levels? Or do you think MolDx will actually allow for premium pricing, given the breadth and depth of your assay?

Well, I'll listen, I'll take the first part, which is very straightforward. I mean our channel, our relationships with the physicians, the cancer centers. They love our technology, and they want additional modalities from us. So MRD and monitoring falls very neatly into that. So there's really a pull from the marketplace to have the complete solution set from us.

So Doug, that's -- we're not going to need additional head count. It's the same sales force, the same taking care of the physicians. It's the same channel for us dealing with the same physicians and same institutions. So it's a very efficient, very natural launch for us from that perspective. Spetz, do you want to take or Luke, do you want to take the pricing part.

Yes, I can take that. Yes. So Doug, so obviously, we're going to be talking with MALD-X, so we don't know. Obviously, we think there should be a premium to it based on what we're doing because it's obviously the exact same assay that we got covered for therapy selection. But obviously, it's a different indication now for we'll have those discussions. But given the position we're in, we're obviously not price sensitive. I think once we actually get to the stage of getting that approval, we'll be ready to launch it even if it's not a like a very high price, even if it's at something similar today.

Okay. Super helpful. And Luke, I think it's another 1 for you, but just on a different topic. You got to really robust 68% gross margin, and I think it was 24% adjusted EBITDA margin this quarter. As we think about new products and the mix shift towards liquid biopsy over time, I'm not sure it's going to be a straight line, but I can easily see an excel how the gross margins move into the low 70s. The EBITDA margin gets into the high 20s, anything you think we should be thinking about as we're updating our models for the next couple of years, given in Excel, it looks like things can move up pretty quickly, but there are definitely a lot of opportunities for you to invest in pipeline products.

Yes, yes. So there is a lot. And I know we've kind of discussed this as a company before. Like we don't want to be in a very high kind of positive EBITDA margin level. We want to reinvest this and obviously, Brian mentioned like the early detection, and that's David's vision and that's kind of going to be one of the key things we're going to focus on going into next year, along with MRD I think for us, Doug, like being in the position we're in, be in that 68% gross margin. And then when has the true-up has been in that kind of low 60s is a great spot for us because even without the true-up, and this was pointed out earlier, we're still in that kind of -- we got the neutral EBITDA like a positive adjusted EBITDA even less than true-up. So we're being very efficient there.

So I think for us, going forward, MRD, you probably noticed, Doug, like MRD, obviously, there's a Medicare reimbursement, commercial is starting to pick up, but like it will take a little longer for us when we switch that on. So MRD is probably not going to be like a high gross margin product right off the bat. We're going to have to work on that similar to what we've done with therapy selection over the years. So I think that's going to kind of compress it a little bit. But for early detection, and we discussed this, we're going to launch data self-pay. So that's going to be a positive gross margin for us. So we're going to be in a great position either way with the addition of the pipeline.

But from a forecasting modeling standpoint, like I do want to cap that we're not going above 30% adjusted EBITDA numbers, like we want to reinvest, and that's the whole point of the company as we think about the future.

Our next question comes from the line of Casey Woodring with JPMorgan.

Congrats on the quarter. So you guys called out strong Caris Assure volumes this quarter. Another liquid biopsy competitors also called out an acceleration in blood-based therapy selection volumes. Just kind of curious how you guys are seeing the market movement towards blood? And has it accelerated in the past few quarters and expectations for that in the future year?

Yes. So Casey, so like it was great for Q3, obviously, seeing that acceleration in the growth rate from Q2, especially knowing that we've only probably been like a little over a year since we launched Caris Assure now. I think what we're seeing in the market and kind of what I called out in the presentation, what we're seeing is more concurrent testing, which is definitely benefiting us.

So last quarter, like about 35% of our blood cases also had a tissue case performed and that went up to 40% for Q3. So I think that's playing out. I think there's more indications. And I think physicians are obviously getting more and more comfortable what we're offering with the whole agile transcriptome along with our tissue and seeing kind of the benefits of that. And obviously, the chips of traction, which is unique to us in the sequencing that we do on that. I think they're starting to see that play out a little bit more.

Got it. That's helpful. And then maybe just a quick follow-up. By our estimation, it looks like the guide implies a pretty sizable sequential step-up in pharma R&D services in 4Q. Can you just provide any color on visibility into that, how you're thinking about the 4Q ramp in pharma R&D? And then what percentage of that growth is going to be driven by the data licensing piece.

Yes. So for Q4, effectively, like the $200 million to $210 million of total revenue, that's in the guide. Effectively, our molecular profiling, the guide is showing $180 million and then we're showing $20 million to $30 million in pharma because you asked the question how much is known. We have a lot of contracts working through the pipeline right now. And similar to what we saw in Q4 of last year, where we did have a pretty big step-up. We do think there's going to be a step-up from Q3. But again, what we would put in the guide for pharma for Q4 would be that $20 million to $30 million range because, again, it's going to depend on timing. And obviously, what we're trying to do as a company is not do a onetime deal and get into longer-term partnerships.

Now you asked about the data component there will be an element of that, but we're not going to start breaking out kind of the 3 pillars in pharma until we actually start getting kind of that pharma revenue greater than 10%, 20% of our mix. We've always been clinically focused. We're always going to be clinically focused, but we do think there's strategic importance within pharma, and we will build it up. But for now, for Q4 is in the $20 million to $30 million for pharma range.

Our next question comes from the line of Patrick Donnelly with Citi.

This is Alberto on for Patrick here. So going off Doug's earlier question, obviously, the EBITDA this quarter was very impressive. And you also mentioned that the cap is around 30%. So just making sure our expectations are in line here. Would you say that Q4 is going to see around similar EBITDA margins this quarter? And then perhaps into the next couple of quarters, it ramps up a bit before getting capped at around slightly below 30%. Is that the right way to think about it? Or would you say...

Yes. I would actually think of what we're putting in the guide because again, we're not assuming any true-ups. We had the kind of true-ups reflected for Q3. So that $200 million to $210 million. And obviously, with the 60 -- kind of mid-60s gross margin and then your OpEx in the 120, you kind of get into that kind of somewhat similar Q3, a little less than Q3, though, is what I would guide to. All right.

Perfect. And then as a follow-up, on another similar question earlier, on early protection, what would you guys say is your consideration for pricing strategy there? Obviously, there are only a couple of tests in the market today. But curious what you guys are thinking in terms of where to go in terms of pricing strategy and what are in the considerations or early prediction?

I should say, that's not -- look, we think our capability is very special. And we'll present advantages both with respect to the technology as well as the data sensitivity and specificity. So like the rest of our platform, our philosophy is going to be premium capability and premium pricing, but we're not disclosing that right now.

Our next question comes from the line of Subbu Nambi with Guggenheim.

You mentioned 43% of your blood test has tissue attached. Do you expect any momentum here in the coming 12 months? And where could this go long term?

Yes. So it's a great question. Like I can't predict where it will go long term. Now we have seen that percentage obviously increase throughout the year. So I definitely think that's a positive. Now obviously, lung is kind of a key indication, especially for blood. So that's a big portion of it. And as more and more indications or more and more approvals for drugs come out related to that? I think you might see that.

But for Q4, what I would estimate would be in that 40% right now based on what I'm seeing. Obviously, we do expect it to increase a little bit. But I don't know whether that will -- you're probably asking the question, will that get to like 50%, 60% over the next year. It's a possibility. But until we actually see it play out with our kind of ordering physicians, I don't want to guide to anything there.

Look, always being prudent, which is great. You opened the call with the announcement that your early detection test will have a -- genome backbone, what is your addition of whole genome to early detection mean for MRD? Would you adopt a similar strategy for MRD?

So we're pretty happy with the current sensitivity of MRD on the exome transcriptome platform. So I don't know that that's necessary. There are aspects of whole genome that are particularly well suited to early detection that are not necessarily directly translatable to MRD.

Our next question is from the line of Mark Massaro with BTIG.

Congrats on the strong quarter. So I wanted to ask a question about data and pharma. So other companies have talked about sort of a challenging pharma environment, yet you guys leverage a massive data set with over 950,000 genomic profiles both whole -- exome whole transcriptome. I would just be curious if you could give us a sense for the types of conversations you're having with pharma, to what extent is a companion diagnostic pathway part of your strategic road map. And just can you give us a sense for any multimodal model conversations you might be having with some pharma companies.

I think that's a -- yes. So we can definitely see a shift in attitude towards utilization of the data and development of foundational models and application of AI. So there's definitely a trend in that incorporation of both image data and molecular data is emerging is something that becomes very, very important. With the end goal, of course, those companion diagnostic components. So the value of the data at the end of the day is bringing new drugs to market and a CDx strategy is very important to that.

Great. And then I'll ask one other. I know you were asked about just what percentage of your tissue test can be accompanied by a blood test already I wanted to just ask, you're seeing a nice sequential increase in your Caris Assure volume. And I think it's probably too early to ask a question like this, but one of the larger competitors just reported a really huge liquid number in their Q3. I just wanted to get a sense if you're seeing -- any change in competitive environment? Or do you think it's just too early and it's just a matter of attaching blood to your tissue?

Mark, I don't -- it's Brian. I don't think there's any real change in the competitive environment in this room. Remember, this market is still very -- the selection alone is still relatively unpenetrated -- in the 30%, 35% range. So we have a long way to go to educate, support physicians, help the institutions develop and support precision oncology programs. facilitate the use of both solid as well as liquid. So I don't look, everybody is scaling, I guess, against an enormous opportunity at a TAM that continues to expand with earlier indications with CD new modalities, molecular signatures, et cetera. So I don't think there's any -- I think if anything, it's positive as there's more utilization, more understanding of the underlying technologies, and we think that given the differentiation that Caris offers that -- all of that is very, very beneficial for us.

Our next question comes from the line of Jack Meehan with Nephron Research.

I wanted to start by asking about Caris Assure. If I look at the underlying ASP and strip the true-ups in the quarter, it looks like it stepped up still almost $500 relative to 2Q. I was just curious what is pulling that up. You talked about contracting with commercial payers on the tissue side. I'm wondering if that traction might be pulling blood along with it.

Yes. Yes. So exactly right. So obviously, having the FDA approval for a tissue when we're actually going to payers, we are asking them to include Assure -- the other key component of sure this year that's helping us drive up the ASP is, if you recall, we got a PLA code for Caris Assure in Q4 of last year. So we've been going through gap fill this year. And obviously, it's the PLA codes on the clinical lab fee schedule, but it's not priced right now. So we've been getting priced at the local rate of [ 36, 49 ] now what we do know next year will be added to the clinical last schedule at 36, 49. So that's helping to is having that PLA code.

So right now, both of our solutions for therapy selection have individual PLA codes that are effectively priced on the clinical lab fee schedule, and that's helping because a lot of the commercial medical policies all from that kind of -- that fee schedule.

Okay. That makes sense. And then I just had a kind of bigger picture question around whole genome for early cancer detection I was curious, like, what do you think you get beyond what you get with exome transcriptome today? And from a workflow perspective, just how do you incorporate this and not add additional complexity relative to what you're doing for Assure today? I guess it just kind of boils down to, do you think the juice is worth the squeeze.

Yes. So in many ways, whole genome is a simpler assay than whole exome and whole transcriptome because you don't have hybridization and you don't have bits. Operationally, there are advantages to whole genome. I mean for the first part of the question, anaplity changes are one of the first things that happens in cancer. And you can see that early on, especially in precancerous lesions and whole genome gives us more resolution there.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to management for any closing remarks.

Listen, we were very happy with this quarter. We're super excited about this marketplace, and we're -- I think our prospects are very, very strong. So we look forward to speaking with all of you again soon.

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

Good afternoon, everyone, and welcome to the Caris Life Sciences Q2 2025 Earnings Call. My name is Kevin, and I'll be your coordinator today. [Operator Instructions] Please be advised today's conference is being recorded.

I would now like to hand it over to Narendra Chokshi with Caris. Please go ahead.

Thank you, operator. Earlier today, Caris Life Sciences released financial results for the quarter ended June 30, 2025. Joining from Caris today are David Halbert, Chairman, Founder and CEO of Caris; David Spetzler, our President; Brian Brille, EVP and Vice Chairman; and Luke Power, our CFO.

Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our prospectus filed with the SEC in connection with our IPO and our quarterly report on Form 10-Q to be filed later today. Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate as of the live broadcast.

This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release issued today. A copy of today's presentation materials can be found on our Investor Relations website.

I will now turn the call over to Brian.

Thanks, Narendra, and thank you all for joining our second quarter 2025 earnings call. This is our first earnings call post our June IPO, and we're very enthusiastic to begin reporting our results publicly. I'd like to start this call by expressing our gratitude to all of our investors who participated in our recent IPO as well as the investors who have supported our previous private financings over the past 7 years. The IPO was a significant milestone for us. We are deliberate about waiting for various elements of our strategy and platform to be in place before going public. We are pleased to finally be public, and we believe that we are in the very early innings of our company's remarkable journey.

As Narendra mentioned, we're joined today by David Halbert, our CEO and Founder, who had an exceptional run previously as CEO and Founder of Advanced PCS. Without David's vision and personal funding, we would not have been able to build Caris Life Sciences with a truly long-term and strategic perspective. Dr. Spetzler, Luke and I will present our results, and all 4 of us are available for questions after this presentation.

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

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

On Slide 4, with respect to molecular profiling revenue, you can see the remarkable increase of 86% year-over-year, which is driven by consistent growth in clinical case volumes as well as very strong growth in clinical ASP. Clinical case volumes were slightly over 50,000 profiles, representing growth of 22% year-over-year and over 9% sequentially.

Caris Assure for therapy selection continues to gain market share and produced a 56% year-over-year case volume growth in the second quarter. In addition, overall ASP increased to $3,256 per profile for growth of 52% year-over-year. This is primarily due to the new CMS rate of $8,455, which took effect retroactively to November 5 last year, the date of MI Cancer Seek's FDA approval. Following this FDA approval, we launched this novel assay on January 1. MI Cancer Seek is the only FDA-approved tissue assay on the market, which features whole exome, whole transcriptome and its adoption has been excellent. This mix shift to MI Cancer Seek has driven the significant increase in ASP this quarter. It's worth noting that the FDA approval of MI Cancer Seek has also produced other benefits more broadly across private payers, which Luke will describe.

In summary, across the board, we have had a very productive second quarter illustrated by the quarter highlights on Slide 5. The strong revenue performance, combined with the operating leverage inherent in our business model naturally has produced significant margin improvement. And specifically, gross margins improved to 62.7%, up from 37.5% in the second quarter last year. This is driven by several factors, including strong overall revenue growth in both clinical and biopharma revenues as well as lab and other operational efficiencies.

It's important to note that our gross margin now properly reflects our MI Cancer Seek's CMS pricing, which is caught up with the tech investments, notably the move to whole exome, whole transcriptome that we introduced a number of years ago. We deliberately front-loaded investments in tech, lab capacity and distribution channel, and we believe the P&L is now very well positioned for sustained, profitable growth. In fact, with this gross margin improvement, we have successfully achieved a major milestone in our path to profitability. And in this quarter, we generated positive adjusted EBITDA of $16.7 million as well as positive free cash flow of $5.9 million, and Luke will expand further on these important developments.

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

Slide 6 illustrates the consistent and systematic growth that our team has generated in clinical profiling over many years. We've grown clinical case volumes at a CAGR of 28% over the past 5 years, and this growth rate has continued in the first half of 2025 at 26% year-over-year. The sustained case volume growth reflects several factors. First, the unparalleled breadth and depth of our [indiscernible] 23,000 genes, DNA and RNA continues to resonate with oncologists, KOLs and cancer center leadership. In addition, our differentiated strategic coverage as well as research orientation, the Caris Precision Oncology Alliance, for example, provides us a competitive edge in the market.

Finally, we believe that the therapy selection TAM continues to expand with new indications as well as ASP growth. And most importantly, we believe that the penetration rate for CGP remains relatively low at around 30%, providing us with growth opportunities to serve more physicians and patients with superior technology over many years to come. We also benefit from strong operating leverage associated with our established distribution channel, seasoned sales force and strategic relationships at both the institutional and oncologist level.

We are now consistently reaching approximately 5,500 oncologists across the country. In addition, there are other technological efficiencies such as EHR integration, which have further enhanced the pipe connectivity with our clinical client base and have facilitated case volumes. We are now EHR integrated with approximately 2,500 clinical sites and over 60% of our orders are transmitted electronically.

As you can see on Slide 7, the Caris data set has continued to grow, driven by our clinical profiling activity and now exceeds 900,000 genomic profiles and 600,000 matched profiles. Since every profile has been generated with whole exome, whole transcriptome technology for many years, our data set features 529,000 exomes and 580,000 transcriptomes. This gives our data set tremendous power for our own internal product development and continues to enhance our attractiveness as a preferred research partner for both academic medical centers as well as biopharma.

The growth of the Caris Precision Oncology Alliance also continues, as shown on Slide 8. This quarter, we welcomed LSU's LCMC Health Cancer Center to the POA as our 97th member. This growth illustrates the continued strength of the alliance as well as the scale of the overall POA collaboration. The POA members benefit from access to our CODEai genomic data set as well as the opportunity to publish with us and collaboration has proven highly productive with a cumulative total of over 1,100 peer-reviewed joint publications.

Finally, we published a landmark Caris Assure platform study, which demonstrates both the power of our whole exome, whole transcriptome approach as well as the potential for this universal assay across the continuum of cancer care.

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

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

For therapy selection, we observed high concordance, a PPA of 93.8%, PPV of 96.8% in detecting driver mutations from blood samples compared to matched tumor tissue, especially with CHIP subtraction. In minimal residual disease and monitoring, the platform accurately predicts disease recurrence with patients predicted to have an event showing significantly shorter disease-free survival, with a hazard ratio of 33.4, a p-value less than 0.005 for MRD and a hazard ratio of 4.39 with a p-value of 0.008 for monitoring. Importantly, this is achieved through a tumor-naive approach, removing the need for prior tumor tissue sequencing. The publication will support continued engagement with MolDX on MRD reimbursement for CRC, and I'll provide an update on this in a few moments.

For early detection, our platform demonstrated sensitivities for stages I through IV cancers of 83.1%, 86%, 84.4% and 95.7%, respectively, all achieved at a high specificity of 99.6%. We believe these sensitivities compare very favorably against all other industry data. Again, it was great to get the study published and demonstrate the strength of Caris Assure as our universal assay and our unique approach allows us to learn from all clinical samples in developing our pipeline as this flywheel allows us to be efficient with our R&D resources, which can be seen by our R&D spend remaining flat year-over-year.

We also had a productive past few months on the publication front, and we have highlighted some of these on Slide 10, along with a summary of the purpose of the publication. One in particular that I will call out briefly is our GPS AI paper, which is an internally developed AI tool we utilize in determining cancer of unknown primary and correcting misdiagnosed cases. We also run this on every tissue case at no additional cost to the patient's insurance provider and no additional specimen requirements. And this led to a diagnosis change in 704 patients through the first 8 months of the study window. And these changes led to altered therapy eligibility based on Level 1 clinical evidence in 86.1% of the cases. That has a huge benefit on ensuring that patients get the right treatment at the right time. And we believe as we continue to leverage our best-in-class data set that these AI tools will become more and more prevalent and continue to make our solutions more proprietary and ultimately providing better outcomes for patients across the whole care continuum.

Moving to Slide 11, I'll give a quick update on our pipeline. As demonstrated by our existing solutions, we always take a comprehensive approach when developing new solutions, which is driven by the mom rule, treating every patient as if they were your mom. And everything on this slide continues to demonstrate that with some exciting advances. We are not guiding to potential launch dates until we have made it through various milestones, including obtaining reimbursement, but I will provide a quick status update on all of the below.

For MRD, adjuvant colorectal cancer, with the paper published, we are currently working on submission to MolDx. The initial study was performed with approximately 44 patient samples, which was not designed to establish the clinical utility of MRD, just that our performance is similar or better than existing solutions. After we submit, we should be able to provide a clear update and feedback on MolDx.

In therapeutic monitoring, we have run samples with 4 time points from 190 patients from the MONSTAR-2 trial with our Japanese colleagues at the NCC in Japan, and it provides across -- and it spans across a variety of solid tumors minus lung. We currently believe that this will be our next MolDX submission once we get CRC submitted in the adjuvant setting. We are taking a different approach with early detection with our initial focus being on breast cancer. You can see from our published data that we have a differentiated platform and great initial performance for MCED due to our WES/WTS approach, and we will continue to refine this ahead of any potential launch. We do not currently plan to seek third-party reimbursement for this and would initially launch as self-pay with either a commercial partner or through our existing distribution channels.

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

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

You can see there is a lot we are working on, and we are very excited for the next phase of our pipeline and utilizing our vast data set that Brian mentioned earlier.

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

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

Moving to Slide 12, starting with revenue. From a year-over-year performance standpoint, we had exceptional organic revenue growth in the second quarter with total revenue growing 81.3% versus Q2 of last year. And this was led by our growth within the molecular profiling business line, which saw an 85.9% growth over the prior year. There are 2 factors driving this growth. Obviously, our volume continues to be strong across therapy selection due to the great work by our sales teams, but the key driver was our improved reimbursement, which was driven by FDA approval of MI Cancer Seek and the associated reimbursement uplift with that on our tissue solution, along with additional progress and true-ups on Caris Assure for therapy selection. And these ASP walks and true-ups are reflected on Slide 13 for additional reference.

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

We continue to see excellent progress with national commercial payers due to medical policy updates and medical policies that cover FDA-approved assays, which has facilitated additional contracting. We also saw good progress on our pharma line of business, which grew 49.1% to $18.5 million for the quarter.

Our goal for pharma is to enter into long-term partnerships that are multiyear, and that continues to be our focus going into the second half of the year. These revenue numbers obviously had a very positive impact on our gross margin for the quarter, which was 62.7% and up from 37.5% in the second quarter of 2024 and was the result of the excellent work by our lab teams in maintaining operating efficiencies with the increased volume, along with the ASP improvement and the pharma revenue growth.

You will also see this great trend on Slide 14, and we believe with the step-up in ASP and our initial revenue guidance that we can achieve our goal of getting to 60% gross margin for the full year of 2025, which would be an increase from 43.4% that we had for 2024. From an operating expense standpoint, we continue to demonstrate excellent operating leverage and the 26% ramp year-over-year was primarily driven by stock compensation and RSUs that vested upon the completion of our IPO, with stock compensation expense contributing $23.8 million of the $27.1 million increase reflected on this slide.

With the IPO, you'll also see in this quarter that we had some large onetime material noncash transactions that hit our net loss and our EPS. And these were the result of the conversion or exercise of the various equity instruments to common stock upon our IPO, and we've called these out in our earnings release. Since these have now all converted to common stock, we do not expect this sort of unusual transaction to occur going forward.

The last item I'll comment on from this slide before jumping to the guidance slide is free cash flow. Q2 was great in this regard as we achieved positive free cash flow for the quarter in the amount of $5.9 million, and this was aided by getting all our payments cut up from Medicare, which I'm happy to say has been completed, and this catch-up is disclosed in our earnings release.

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

So while we have some catch-ups in Q2 on the payment side, you can still see the dramatic improvements we've made in cash burn by comparing the first half of this year with a free cash flow burn of $28 million versus the first half of last year when we had $141 million of free cash flow burn. We also believe that as we transition to the second half of the year, that we will continue to show improvement, with our goal for the remainder of the year being able to control our burn and achieve positive free cash flow along with continuing positive adjusted EBITDA, while also continuing to pursue the exciting pipeline that Dr. Spetzler discussed earlier.

And finally, wrapping up, jumping to Slide 15, I'll give a brief update on guidance. As a company, we will initially provide guidance on total revenue and expect the clinical therapy selection volume basis. With regards to these, we currently expect our total revenue to be within the range of $675 million to $685 million for FY 2025, which would be a 64% to 66% increase over 2024. And I expect our clinical therapy selection volume to be within 19% to 21% growth for the year.

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

[Operator Instructions] Our first question comes from Michael Ryskin with Bank of America.

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

Yes. Mike, it's Luke. So yes, so the key thing that drove the ASP for tissue was primarily kind of what we disclosed, the 78% of our tissue cases. That was kind of the #1 driver. We did get kind of everything caught up for Medicare, and it's operating kind of as expected. So that was great. And then the other uptick was on the commercial side.

So right now, through the first 6 months of the year, like we've contracted -- we've had like covered lives greater than 170 million so far in the first 6 months, which is a testament to kind of the great work our market access team has done. So that's kind of driving the uptick and kind of better than expected for Q2.

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

Yes. There's definitely opportunity to drive it higher. Obviously, we've only had about 4 months of payments so far flow-through of MI Cancer Seek. So similar to kind of our science approach, the more data you get, we believe we'll have greater insights and greater opportunity to drive that further. But we're kind of waiting for the collections to come in. The way the model is kind of built from an ASP standpoint, because we disclose both our tissue and blood separately, I'll provide kind of what those numbers are.

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

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

But the great thing about the first half of the year is seeing that reacceleration in our tissue growth. Obviously, last year it was about 14%. It's about 19% through the first half of the year. So that was definitely very positive. We think we can continue that momentum into the second half of the year.

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

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

Our next question comes from Dan Brennan with TD Cowen.

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

Yes. I think there are 2 components to that, Dan. So obviously, last year, like we did a big launch with our Assure product, and it was quite unique. Obviously, we have the buffy coat there with the liquid, and there was a lot of education for the field and for physicians. So we kind of worked on that last year. What we're seeing this year is, obviously, the FDA approval is helping quite a bit with that kind of acceleration.

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

And Dan, I would add that the macro here, we feel very good about. I mean this market continues to evolve. The TAM is large and growing. It's growing with adoption and education of the physicians. It's going to earlier staging, ASP growth, all of the things you've observed before. And the penetration rate is still relatively low at about 30%. So that's the market.

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

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

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

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

Our next question comes from Vijay Kumar with Evercore ISI.

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

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

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

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

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

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

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

The next question comes from Doug Schenkel with Wolfe Research.

This is Colleen on for Doug. Just a question on OpEx. Are we correct in assuming that most of the R&D spend in the near to midterm will be on the dry lab, more computational based that should stabilize R&D spend in dollar terms? And are you doing any big studies to support the pipeline that we should be aware of?

One thing that's been coming up in recent years also on the OpEx side in Specialty Diagnostics is that you really need brand recognition and accordingly need to spend on your sales force to grow. Can you potentially dial back on R&D and G&A to support a higher level of sales and marketing spend over time?

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

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

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

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

But the reality is it's that same team that has deep relationships into the cancer centers, the institutions and the individual oncologists. So that will, I think, serve us well, and they're looking for the next set of assays and capabilities from us through that same channel.

Our next question comes from Sebastian Sandler with JPMorgan.

This is Rachel Vatnsdal from JPMorgan. Maybe just to dig into the blood performance there. So you guys saw a nice step-up in volumes. So can you walk us through what type of color did you really see on that blood therapy selection launch? And where are you seeing the traction? Is it in new accounts? Or is it existing tissue customers adding a complementary blood test? And then can you give us an update on what is the attachment rate that you guys are seeing between blood versus tissue?

Yes. So Rachel, it's kind of a mix of both. So obviously, it's our existing accounts that are utilizing us for tissue and that are kind of switching over. And then it's also new accounts that we're kind of penetrating. So for us, like one of the key things we're also tracking is obviously the updated guidelines around concurrent testing as well. So, so far for Q2, for example, like for our blood cases, about 35% of those who also had tissue done, again, in accordance with the guidelines. So we are seeing some uptick in that, especially around lung in particular. So that's kind of where we're seeing the volume coming from.

I think one of the key catalysts for us going forward is, obviously, right now, our assay is not in New York state. It's not New York state approved. So that's a catalyst we're working on right now to get that submitted. Hopefully, over the next kind of 6 to 12 months, that will kind of continue to build on that. So it's existing plus kind of new accounts. It's a bit of a mix.

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

Yes. So as I said earlier, Rachel, I think it's more weighted for us, like our pipeline is more weighted for us in kind of Q4 than Q3. We do have a lot kind of working through our pipeline right now. Again, we've been generally kind of more clinically focused. That's been our history, and that's what we've been focused on. So that's why pharma revenue and R&D revenue has been in that kind of 10% range.

So I definitely think going into the second half of the year, we'll see some uptick there, especially against the first half of the year. But it will be more along the pillar of data plus kind of our CDx pillar as well is where I expect the kind of growth to come from.

Our next question comes from Patrick Donnelly with Citi.

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

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

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

Understood. And then maybe one just on the commercial payer side, obviously, pretty important as we think about the ASP and revenue build going forward. It seems like great traction here post the approval. Can you just talk about how things are trending relative to your expectations?

And then just how we should think about more payers coming on board over the next few quarters as we just build that ASP again, the commercial is obviously a big piece of the step-up as we think about getting into next year.

Yes, Patrick. So yes, it's been trending very positively. So we do expect -- so some of the bigger national contracts that we've signed already will start to play out now starting in the second half of the year. So like personally, I think we're like a quarter or 2 ahead of kind of initial expectations going into the year. So we'll get more information as we progress into the second half of the year. But I definitely think it's trending positively and kind of a little bit quicker than our initial expectations going into kind of what it should look like next year in 2026.

Our next question comes from Subbu Nambi with Guggenheim.

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

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

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

And while I have you, what have the KOL reactions been to the recent GPS AI publication? That offering has already been on the market in the first 8 months. The reclassification data was already included in the paper. Do you expect this to be a market share inflection or a driver?

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

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

Correct, yes.

Our next question comes from Mark Massaro with BTIG.

Congratulations on a really strong quarter out of the gates. I wanted to start with the competitive environment. Clearly, you came in and delivered volumes well in excess of our model. I'm just curious, especially on the tissue side, where you guys have a leadership position. What are you seeing in the field, I guess, in the clinics in the end markets? How much room do you think there is left to go? I know Brian talked about 30% penetration. But I'm just curious about account by account, if you think you can continue to convert and take share in accounts over the years? Or do you see other players kind of in some of these accounts?

Yes. Mark, thanks for the question. Yes, we're very positive on this market. We think it continues to grow. Physicians continue to adopt and in particular, understand the value of breadth and depth and importance of sophisticated information and assays. And I'd say the other very important thing is that the cancer centers, the institutions, academic and corporate are really just in the beginnings in some respects of getting organized and standing up systematic precision oncology programs designed to get all patients profiled, profiled consistently, systematically and generating the best data and the best outcomes.

So this is a secular trend that has begun. It's going to carry us for a long time, and the leaders in this field are going to benefit. So the clients in this sense, the doctors as well as the institutions need a real partner. And I think not only our technology, but also our platform, the Precision Oncology Alliance, our strategic teams that help set up these programs provide a real value add and an edge that will help us grow the market, increase the penetration of real CGP and in our case, whole exome, whole transcriptome against a field that remains relatively unpenetrated.

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

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

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

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

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

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

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

Yes.

Our next question comes from Jack Meehan with Nephron Research.

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

Yes. We won't guide, Jack. Obviously, we're being very careful there, especially things that are outside our control around timing of FDA approval. But definitely, it's an opportunity for us from an ASP standpoint. Our strategy there is to pursue kind of a similar path that we did with tissue. Obviously, with blood, what we would do is we would pursue FDA approval, then go try and get ADLT and kind of price it there. But again, we don't have that in any of our numbers for the remainder of the year. So we'll give updates as we progress there, but no expectation around time line.

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

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

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