Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sophia Genetics SA (NASDAQ:SOPH) signed a record 92 new core genomic customers in 2024, including 31 in Q4, indicating strong market demand.
• The company achieved a 13% year-over-year growth in clinical analysis volume, excluding COVID-related impacts.
• Sophia Genetics SA (NASDAQ:SOPH) expanded its global reach to nearly 800 healthcare institutions across more than 70 countries.
• The launch of new applications, MSK Access and MSK Impact, has been well-received, with 34 customers adopting MSK Access across 20 countries.
• The company improved its adjusted operating loss by 20% year-over-year, demonstrating effective cost management and operational efficiency.

Negative Points

• Biopharma revenue declined by approximately $4 million in 2024, impacting overall revenue performance.
• Gross margin decreased from 69% in 2023 to 67% in 2024, indicating pressure on profitability.
• The company experienced a decline in hereditary cancer application growth as labs shifted to exome applications.
• Latin America saw a notable decline in performance due to the acquisition of a top customer by another lab.
• Sophia Genetics SA (NASDAQ:SOPH) anticipates a moderate negative impact from exchange rate volatility in 2025.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Signs with SOPH.

Q: What are you seeing in terms of biopharma funding and any recovery trends, and what indicators give you insight into customer volumes? A: (Unidentified_7, Unidentified_8, Unidentified_5) The biopharma environment has been challenging with budget constraints, impacting revenue in 2024. However, the pipeline has been refilled with repeatable opportunities, and there is improved momentum in pharma activities. The guidance does not assume pharma growth, but there is potential upside in 2025 and 2026. For customer volumes, the model relies on new business signings, which take 6-9 months to implement and generate revenue. The backlog of signed contracts gives confidence in clinical business volume assumptions.

Q: How should we think about application volumes and ASP assumptions for 2025? A: (Unidentified_7, Unidentified_8) The company signed a record number of new customers in 2024, which should lead to increased volumes as implementations progress. ASPs were impacted by the end of sponsor testing in 2024, but new products like MSK Access and Impact, which have higher ASPs, are expected to contribute positively. The growth in 2025 is expected to be more volume-driven, with ASPs potentially increasing as new products become a larger part of the mix.

Q: Can you provide insights into the MSK Access and MSK Impact opportunities and their market potential? A: (Unidentified_7, Unidentified_8) MSK Access and MSK Impact have shown strong uptake, with 34 customers for MSK Access and 7 for MSK Impact since their launches. Liquid biopsy testing is expected to grow, with reimbursement and market access being key factors. The pipeline includes over 60 opportunities, and the company is optimistic about the potential for these products to drive growth, particularly in the second half of 2025 and beyond.

Q: How are you addressing the NIH indirect cost caps and their impact on US academic medical customers? A: (Unidentified_7) The exposure to NIH cuts is minimal, with only one customer potentially impacted. The company sells its platform on a consumption basis rather than lab equipment, which should mitigate the impact of these cuts.

Q: What are the expectations for the long-term growth rate and the path to profitability by 2026? A: (Unidentified_5, Unidentified_8) The company aims for a modest improvement in gross margins and expects to drop about $0.60 of each incremental sales dollar to the bottom line. The focus is on cost control and scalable growth, with the expectation of approaching adjusted EBITDA break-even by the end of 2026 and achieving positive adjusted EBITDA in the second half of 2027. The long-term growth rate of 30-35% constant currency is still considered realistic, driven by strong pipeline and implementation improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.