Participants

Kevin Puylaert; VP - Managing Director, EMEA; Sophia Genetics SA

Jurgi Camblong; Co-Founder and CEO; Sophia Genetics SA

Ross Muken; President; Sophia Genetics SA

George Cardoza; Chief Financial Officer; Sophia Genetics SA

Dan Brennan; Analyst; PB Conen

Jason Taes San; Analyst; Morgan Stanley

Mark Massaro; Analyst; BTIG

Sir Banbi; Analyst; Guggenheim.

Presentation

Operator

Good morning. My name is Nicole and I will be your conference operator today. At this time. I would like to welcome everyone to the Sophia Genetics third quarter, 2024 Airlines are in listen-only mode. Following the presentation, we will conduct a question and answer. If you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 1.

Kevin Puylaert

Welcome to the Sophia Genetics third quarter, 2024 earnings conference call. Joining me today to discuss the results are Doctor Jurgi Camblong, our co founder and Chief Executive Officer Ross Bhan, our company President and George Cardoza, our Chief Financial Officer.
I'd like to remind you that management will make statements during this call that are these statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties and factors that could cause results to differ in the documents and reports filed by Sophy Genetics. From time to time with the Securities and exchange commission. During this call, we will present both IFRS and non IFRS financial measures, a reconciliation of IFRS to non IFRS measures is included in today's earnings specialties, which is very.

Jurgi Camblong

Thanks, Ken and good morning everyone.
I will start today by giving a brief update on our Q3 performance which played out largely as expected. A skin card volume re accelerated and strong cost management results per year. Improvement to cash burn.
I will then highlight a key growth driver over the next several quarters in MS K access powered with so DDM which continues to attract strong interest from customers across the globe.
And last, I will conclude with an exciting update on our leadership team as we further position our result for future growth, growth, performance and outlook for the remainder of the year.
As mentioned, Q3 played out largely as expected as chemical volume. We perform approximately 91,000 analyses in the quarter representing the event when excluding COVID related volumes.
As expected, the temporary headwinds affecting France, Italy and Spain in the first half of the year began to subside and analysis volume trended towards normalized levels of growth across the key regions, expanding growth in the ka which we flagged as a headwind last quarter.
As anticipated bio formal revenue was down materially in the period is made to the Bio forma business in Q2 and leading indicators such as a healthy and growing momentum as we move to the end of 2024 and into next year based on these factors. We reaffirm our revenue guidance for 2024 of overall growth into 2025.
The major driver of the clinical re acceleration in Q3 has been consistent strong new business momentum throughout the year. During the quarter, 22 of the new customers signed earlier this year entered routine usage up from 14 customers in the prior year period.
This meaningful step up was a result of a cluster and consistently signing new customers each quarter.
On the new customer front, we continued the trend of signing new business at elevated levels. In Q3d M, recent customers went into the Martin's Hospital in the UK with adopting Sophia DM for hereditary cancer screening, xview in the US, who is adopting the platform for rare and neural disorders and hospital hero Diane is one of the most prestigious hospital in the world based in Brazil with adopting MSP access powered with social media, we will continue to be laser focused on getting these new customers into routine usage throughout the end of the year and into 2025.
As we continue to onboard more and more new customers to Sophia DDM. I have been pleased to see the scale of our technology platform come to life.
Over 2024 we have consistently improved all expand categories while also strength Russians.
In Q3, we expanded gross margins yet again and achieved an adjusted gross margin of 73.1%.
We also continue to reduce operating by over 10% year over year.
In addition, I'm incredibly proud that we delivered an almost 40% year over year improvement. Cashback.
Looking ahead, we reiterate the previous guidance with respect to adjusted gross margins and adjusted operating loss and remain confident in our path to profitability.
In summary, we saw a steady re acceleration of clinical volume in Q3. While also delivering substantial cost improvements. The outstanding 39% reduction in year over year cash burn and our continued ability to deliver a strong new business momentum positions us well for future growth.
As we look ahead to 2025 I would like to take a moment to highlight one of our major growth drivers for next year. MSK Access powered with social media.
The launch of MSK access on Sophia DM last quarter has enabled hospitals and labs across the globe to launch world renowned liquid biopsy testing. Instead of having to rely on a central reference lab.
In many cases, this decentralized testing results in lower costs and faster turnaround time while also enabling institutions to retain control of their patient's data for research or other proposals.
Since launch 18 customers across the world have adopted the application, the growing global community of MSK access users on Sophia DN now spans five continents and 10 countries and includes world class institutions such as the University of Heidelberg in Germany NHS, Institutions in the UK and Bioreference and Tennessee Oncology. In the US.
It's incredible to see this community of industry leaders come together to provide best in class cancer testing to patients across the globe.
Moreover, we are immensely proud that social m is the technology platform which has made this opportunity a reality customers to adopt MSP ACCESS during 2024 to implement the application and begin routine testing. Over the coming month of the 18 institutions sign to date five very recently completed implementation and will ramp up their usage in Q4 and into 2025. As these customers come online, they will provide a meaningful catalyst to growth next year.
Only the impressive progress we have made with MSK access. I am also thrilled by the recent launch of the applications. Solidor testing, counterpower MSCA impact powered with Sophia DM.
This application which was launched in October offers yet another exciting area for growth as it is typically used in combination with domestic access to provide patients with best in class treatment.
As we enable more and more institutions across the globe to launch liquid biopsy and solitude more testing. Our network is also starting to initiate BioPharma customers such as astrazeneca are excited to leverage the Sophia network to improve the deployment of their drugs and expand market access. Moreover, the data from these diverse patient populations as well as the predictive multimodal algorithms we are developing on the data offer immense value to BioPharma companies in the areas of drug development and discovery.
Over the coming months, I look forward to updating you on our progress with bio forma partners and the expanding decentralized deployment of MS K access and impact as Sophia continues to grow and exciting opportunities for future growth continue to emerge. I'm happy to end today by announcing a few changes to our leadership team which will position us well for the future.
First, I would like to congratulate Ross on his well deserved promotion to company President as President Ross will oversee the company's global business operation, growing and scaling the business. He will continue to manage all commercial and go to market functions building on the strong progress he has already made in this critical area. He will also work closely with me on strategic matters as we continue to evolve as the leader in data driven medicine.
Second, I'm happy to welcome George Cardoza to the team as Sophia's new Chief Financial Officer, George brings a wealth of experience which includes deep financial expertise and a strong background of scaling and growing profitable businesses. Prior to joining Sophia George was the CFO and head of service delivery for biocartis.
He also spent over 12 years with Neogenomics invol which include Chief Financial Officer, President of BioPharma services and Chief Operating Officer.
Prior to Neogenomics, George spent more than 14 years with Quest Diagnostics in various roles at Sophia Genetics. George reading, accounting PN A tax and Treasury. We're happy to have you as well.
With these changes, Sophia is now positioned better than ever to win in our space and capitalize on the momentous opportunity ahead of us. With that. I will now turn the call over to Ross who will provide more detail on our Q3 performance and outlook for the remainder of 2024.

Ross Muken

Thank you Jurgi and good morning everyone. As Jurgi highlighted third quarter results came in largely as expected. Clinical volume growth continued to re accelerate as the temporary headwinds impacting France and Italy in the second quarter began to subside. Spain remains somewhat challenged in the period and we expect this softness to pursue into 2025 given ongoing reimbursement dynamics and the solid tumor mark approximately 91,000 for the third quarter of 2024 compared to approximately 78,000 for the third quarter of 2023 year. Over year growth in analysis volume was 16% or 17% when excluding COVID related volumes from an application standpoint strength and hereon testing and across our rare and inherited disease portfolio led the way with 26% and 29% year over year growth respectively. North America and Asia Pacific experienced the strongest growth in the third quarter with both regions growing at approximately 30% year over year growth in the media returned to the company average. However, weakness in Latin America partially offset the growth in other regions due to the churn of a large account that was acquired by another private lab earlier in 2024.
While clinical volume experienced an initial stage of re acceleration, a challenging macro environment has continued to limit BioPharma growth as budget constraints have made the signing of large contracts difficult and cause sales cycles to elongate. Additionally, we had one major high value contract again, partially slip from the third quarter to the fourth quarter.
Weakness in BioPharma offset clinical performance and total revenue for the third quarter of 2024 was 15.9 million compared to $16.3 million for the third quarter of 2023. Representing a year over year decline of approximately 2.5% file farmer revenue declined over 2 million from the third quarter of 2023 to the third quarter of 2024 and was the primary driver behind the overall softness in the period. Is also worth noting that in Q3 of 2023 it was a tough comp for us overall as revenue grew 40% during that period.
Moving on to an update, customers were 462 as of September 30 2024 up from 431 in the prior year period and up sequentially by five customers. Relative to Q2 of 2024 we continue to see strong new business momentum in the quarter as we sign 20 new logos in the third quarter, we are laser focused on getting these 20 customers as well as the influx of new customers signed during the first half into routine usage as quickly as possible. Beyond new customer wins, bookings and pipeline remain strong. Continuing. The trend we've seen throughout 2024 annualized revenue churn rate was less than 4% for the third quarter of 2024 which is in line with our historical averages, net dollar retention for the third quarter, which is net of revenue churn for the year was 109% compared to 127% in the third quarter of 2023. This the performance in Latin America and the relative moderation of growth in Europe. Despite the select re acceleration in the period, gross profit for the third quarter of 2024 with $10.7 million compared to gross profit of $11.3 million in the third quarter of 2023 representing a year over year decline of 5%. Gross margin was 67.2% for the third quarter of 2024. Compared with 69.1% for the third quarter of 2023 adjusted gross profit was $11.6 million. A decline of approximately 2% compared to adjusted gross profit of $11.8 million. In the third quarter of 2023 adjusted gross margin was 73.1% for the third quarter. Of 2024 compared to 72.5% for the third quarter of 2023. We remain proud of our ability to manage cost scale compute and continue to expand gross margins and performance. This is exacerbated by the aforementioned biopharm of revenue weakness which tends to carry a higher than average gross margin.
Total operating expenses for the third quarter of 2024 were $26 million compared to $27.8 million for the third quarter of 2023 across the functions, we continued to benefit from lower head count on year over year basis. R&D expenses decreased during the quarter as we increasingly focus on high ro I projects. Additionally, I remain be pleased with our progress on the G&A side where we also continue to benefit from targeted process improvements, distant investments and the optimization of our public company costs. Sales and marketing expense was up a touch primarily due to select investments oriented and accelerating penetration of several key end markets as well as marketing initiatives to support our robust new product momentum operating loss for the third quarter of 2024 was 15.4 million compared to 16.5 million in the third quarter of 2023. An improvement of 7% adjusted operating loss for the third quarter of 2024 was $10.6 million compared to $11.8 million for the third quarter of 2023 an improvement of 10%. We remain pleased with our trajectory toward adjusted operating profitability. We continue to be highly disciplined with respect to head count. We also continue to scrutinize all on hitting our growth targets and achieving the operator. I was particularly proud to see us maintain strong bottom line performance despite the expected soft revenue pull through a proof point of strong operating leverage in our business and the discipline of our team lastly, total cash burn for the third quarter of 2024 was $9.6 million.
The 9.6 million in cash burn represents an impressive improvement of 39% compared to the 15.8 million in cash burn in the prior year quarter. As you mentioned, we remain happy with our cash utilization trend and are on track with respect to our medium term liquidity trajectory. Cash and cash equivalents were approximately $95.8 million as of September 30 2024 I'll now turn to our 2024 outlook given the promising re acceleration of clickable volume in the third quarter. Sophia Genetics is reaffirming our full year revenue guidance for 2024 of 65 million to 67 million of revenue or 4 to 7% year over year growth. We are also reaffirming our adjusted gross margin guidance in the range of 72% to 72.5% as well. As our adjusted operating loss guidance between $45 million.50 million dollars following our continued strong cost management. In the third quarter of note, the implied revenue range for the given the strong predictive nature of our clinical growth, it is meant to capture a wider range of potential outcomes in our BioPharma contract delivery where several large deals are expected to contribute in the period, we remain diligently focused on improving our BioPharma execution. Furthermore, we will continue to guide the business conservatively on a revenue recognition basis going forward. Given the challenges experienced earlier in 2024. With that, I would like to turn the call back over to Jurgi for the closing remarks before we take your questions.

Jurgi Camblong

Thank you, Ross.
I'm proud of what the team achieved this quarter, particularly our continued ability to expand growth margins, reduce operating loss and improve our bottom line.
I also remain excited about our future bookings. Momentum is strong and then markets continue to grow. Cancer rates are increasing worldwide. Better therapies are being developed each day and data is critical for patient care as the development and drug deployment.
Given our business sits at the center of this innovation accelerating and enabling the adoption of each. We remain confident in our long term growth in closing. I want to say thank you to our Sofia colleagues, partners, customers and investors for joining us in our journey to transform patient care with data driven medicine Please note, we are presenting at the Google and Healthcare Conference next week in Boston. We all look forward to continuing to update you on Sophia's future success of democratizing data driven medicine with that operator. You may now open the line for questions.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Should you have a question? Please press the start followed with the number one on your Touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline with the number two? If you are using a speaker phone, please lift the handset before pressing any key one moment, please. For your first question, our first question will be coming from Dan Brennan from P B Conen.

Dan Brennan

Questions here and congrats, congrats on the quarter maybe just zooming out a bit on MS K the relationship. You know, you guys cited it 10 times in the press release. It's just more prominent right now than it's been in the past. I think. So, could you just kind of zoom out and give us a sense of, you know, kind of what are you guys enabling on MS K impact and access? Maybe? How is this test positioned broadly? And what kind of financial impact could this have as we look out to 25 to 26? I think you used the word meaningful impact in your prepared remarks on 25.

Jurgi Camblong

Good morning, Dan. And thank you. So I'm going to start addressing, you know, with what we are doing in terms of the offering. And then I will let Ross give you a sense of what the opportunities. So as you know, that liquid biopsy testing is primarily centralized today, right? And as demonstrated to be extremely important clinically either for diagnosing patients when it's very hard to do that from a biopsy such as for stages in lung cancer, prostate cancer, but as well to follow them Longin patients as they are being treated with a cancer drug. And so MS get access to start with as being one of the applications that are being the most used for liquid biopsy testing around the world and as being as well very much used in scientific publications. And so as a reminder, a couple of years ago, we had signed an agreement with MS K to basically decentralize MS K access an application. And so add this application in our platform in a bundle access mode. So this means the platform comes with a test kit that then facilitates the adoption, taking a step back. It took us a year to industrialize the solution and we launch MS access early this year. And since then, we've been having great traction right now. Actually, we have already 18 customers around the world that have time for that including five of those that already moved to routine and this in five continents, in 10 countries right. So I think MS K access itself in a decentralized version with Sophia DDM has a huge potential to transform care in cancer around the world. And now to your point on the why we've been talking so much about MS K in general beyond the SCA access. MS K had developed another application which I would say as well as best in class, the C GP application called the SK Impact, which is being used for a solid to more testing. And as we industrialize MS K access for it's decentralized version with now being launching the P within our platform. And there we see already a lot of demand in the market and we anticipate that eventually a lot of customers are going to actually use MS access and impact in a combined way. So with that, I'm going to now let Ross give you a bit of color on how this should influence our growth performance in the future.

Ross Muken

Thanks Dan. So relative to Jurgi's comments, obviously, we already see quite good interest in the product with the 18 customers. Jorge mentioned some of which are already starting in the third quarter and into the fourth quarter, distributing from revenue to contribute materially more. So over the coming years, we also have 13 customers right currently in the implementation phase to give you a sense. You know, the typical application when we sign, it could ramp on average to about $100,000 per application per logo. I think the ASP per patient is materially above our company average and volume tends to be greater given it is more sophisticated, larger laboratories that are adopting, you can assume that number is, is much higher than the K. And so that should give you a sense with where we already are in terms of potential run reg revenue contribution over the coming months. And just to give you a bit more color, you know, we have today in the pipeline, nearly 50 incremental customers. And at the recent event, which I believe you may even have been attending Dan or someone from your team in New York, we had 70 companies are quite high given obviously the adopting this type of testing and, and genomic data production and laboratories all around the world. And so I think you can see from where we are, we're quite confident that this will be a a, you know, nice contributor to our growth over the coming quarters and coming years.

Jurgi Camblong

Maybe done to, to end with your question. Beyond the clinical market, there is a lot of interest as well of the BioPharma market because the BioPharma companies really want decentralized testing for multiple reasons including market access needs, but as well to be able to be exposed to data so that they can make discoveries.

Dan Brennan

Great if I can assess one more, maybe you know, nice quarter. I know. I don't think you guys, you guys touched upon some, some of the benefits for 25 but you know, consensus has you guys accelerating your top line growth a little bit, a little bit above 20% next year. I'm just wondering, do you think that's realistic with like, you know, around five or 6% growth in 24 and just maybe to this big acceleration in 25?

Jurgi Camblong

Thanks then. So look, indeed, I think the thing with our ability to improve cash by 39.1% on an adjusted basis, right? So this, I think demonstrates the scalability of our operations and of our platform and when it comes to the growth, the clinical growth as being good, as we said, the clinical volumes grew 17% year on year, ex COVID. So I would say we're in a good path to re accelerate the business. I will leave you now. Ross so that he can give you a bit more flavor of how this should be materialized in 2025.

Ross Muken

So obviously, Dan, it's, it's too early for us to give you you know, quantitative color on on next year. But I would say, you know, in, in general and frankly, when that happens, it will be George our new CFO who will do it. And so I count on him to, to be able to. But I would say in general, you know, for us, as we think about this year, obviously, as you know, you know, we were disappointed with the performance particularly of our BioPharma Business when we came to you in the second quarter and, and we had to reduce our guidance for the year, right? So I think for us, the message this quarter is kind of one of stabilization and improvement. And so, you know, as you think about, you know, the other commentary we've given you over the year with respect to pipeline new business, bookings that have already happened. The exciting traction we're getting on MS K based products that are moving into routine, I think, you know, so what we're trying to get across is we're obviously quite comfortable in a re acceleration of growth. I think the, the magnitude and, and the, the specifics we will obviously cover when we, we see you in in 2025. But I think the, the main take away for you should be that we're, we're quite confident that we're back on a path to being able to display to more normalized performance, typical of what we had expected for this business.

Dan Brennan

Great. Thanks Ross.

Operator

Our Next question will be coming from Taes Svan from Morgan Stanley.

Jason Taes San

Hi, this is Jason Taes Svan Congrats on the quarter and thank you for taking our questions. So maybe just a question on pricing. You previously talked about some pricing headwinds your business is facing. How did those pricing headwinds play out during this quarter? Was it mostly ina or across regions? And are you seeing trends stabilize, improve or worsen? And if the trends haven't improved yet, are there any indicators into when this dynamic could normalize?

George Cardoza

Good morning, Jason and thanks for the question. So indeed, right, in our volume, which is a consumption based volume, volume of analysis and ASP are very important elements. Ross, you want to give some color on the pricing.

Ross Muken

Sure. So you know, one of the other trends we shared last quarter was obviously that, you know, we had some parts of Europe in particular where there was a modest pricing pressure. You know, we saw a bit of that continue in Spain in France, we're starting to see a stabilization. So we think some of that was quite temporal and and frankly related as well to some of the changing dynamics in the the sequencing market overall. Both with new players entering as well as with new platforms coming online. I would say, you know, as we look out for us, you know, we'll continue to take price on the base portfolio globally. So we're quite confident that I would also say if you think about some of the newer products right? Coming in from a mixed perspective, you know, these tend to have higher ASPs than average, right? So ultimately that as well from a mixed basis will drive up our, our overall ASP. So I, I think again, we're managing some of the dynamics we saw in the second levels again in 2025. But for us in general, price continues to be overall a positive lever. I would say longer term for the business.

Jason Taes San

Got it. Thank you for that color. And then maybe just like clicking back on some product launches you talked about in the past, I think you previously highlighted a partnership with Microsoft and NVIDIA to launch a scalable whole genome sequencing application on DDM. So how's progress been on this application? And is it still on track for launch by year end?

George Cardoza

Yes, so, absolutely. So indeed, in rare narrative disorders, we see a trend towards more exam sequencing towards more genome sequencing and actually, we believe that there will be as well Jason versions which will be enhanced exams and genomes which will improve the accuracy of these applications. And that's something we're very much focused on with both Microsoft and NVIDIA.
Great. Thank you guys so much.
Welcome.

Operator

Next question will be coming from Mark Massaro from BTIG.

Mark Massaro

Hey guys, this is Vivian on from our thanks for taking the questions that you called out headwinds and funding at the time of the guidance reset last quarter. Could you maybe just speak to your confidence that these headwinds can roll. My understanding that that revenue is simply pushed out, not canceled. So it might even be a tail wind for you. Looking at 25.

Jurgi Camblong

Thanks.

George Cardoza

Yes, thank you, Vivian and good morning. So first to start with, you know, last quarter, Well, last year Q3 was a strong bio forma quarter for us. So definitively on the revenue base, this quarter, we're being penalized versus the, the Q3 of last year. Despite that, as we said, the clinical business grew pretty nicely with 17% for you. May remember, we revised our strategy end of Q2, 2024. We're on the X activities such as response for testing as well as on market taxes related needs. So basically, activities were having a large footprint and a network of customers outside us is really important for the pharma industry and the former clients. And I would say this strategy has proven to be pretty good and our sales pipeline has been growing over the last quarters. Now said that obviously the former budgets are still a bit tight. And so I think being very disciplined on understanding what's the value that one can bring to the pharma is extremely important.

Ross Muken

You know, and I would just add, so if you look at the range for the full year, obviously, it's wider than we would expect typically And that's because again, the outcome of Pharma in the fourth quarter, there, there's quite a wide range of potential revenue contribution, but it still implies certainly from where we were in the 2nd and 3rd quarter. Continue proof point to sort of a re acceleration or, or at least a stabilization in that part of the business. But I think to Jurgi's point for me personally, we obviously have two new leaders that are, that are driving those efforts that are quite strong. We feel much better around sort of our go to market and our positioning in both data and diagnostics. And we're seeing that I would say manifest itself in our pipeline. And so we're committed, did obviously pushing those through to bookings and revenue and obviously stay tuned for 2025. But I think fundamentally we're in a much better position today than we were back in in the second quarter. And, and the momentum is, is starting to return to that business. Although, you know, to the point I made on guidance, we're still going to remain conservative with respect to what we include in the forecast, just given the experience we had this year.

Mark Massaro

Okay. Understood. And you might have touched on my next question a little bit, but just for to get to the midpoint of your guide, I guess what product areas or seasonality tailwinds are giving you confidence there. It sounds like it's mostly just BioPharma revenue, but I just wanted to confirm that.

Ross Muken

So, just a reminder on our business, it, it typically runs like many, you know, health care companies from that perspective where you tend to have more seasonal demand in the fourth quarter. So, and, and as well for us, given the exposure we have in Europe third quarter, from a volume perspective tends to be you know, lighter just given the summer holidays. And so some of it is just the typical sequential improvement you normally see in the fourth quarter from a volume perspective. As we've also reminded you throughout the year, and I mentioned when I spoke to Dan before, we also have had quite good net new bookings momentum and logo momentum. So we have quite a number of accounts coming online, including some of those relative to MS KX contribution. And so between the sort of seasonal improvement and the continued, I would say stabilization and pricing in Europe, as well as you know, the new accounts coming online, we're quite confident that clinical will, will continue with a strong trajectory into Q4. And and then next year and then as you well noted the big delta on Q4 in terms of the, the true width of the range really comes with Pharma, right? So you can see with the material step down that we implied for this quarter that obviously our run rate for BioPharma exiting 23. And in the beginning, as we had expected in 24 was expected to be materially higher. So we are starting to build back to that base, which is again, give you confidence in sort of the, the revised strategy, but certainly there's still some variability or at least conservatism on our and relative to the recognition of some of that revenue because it's a bit different than our typical usage based. And so that is what is implied in the forecast. But obviously, you can expect there's, you know, at least relative to what we've provided a high degree of confidence. And certainly, you know, the the low to mid portion of the range relative to what we already have or have recognized or expect to recognize.

Mark Massaro

Great. Thanks for taking the question.

Operator

Our next question in line will be coming from Sir Banbi from Guggenheim.

Sir Banbi

Hey guys, thank you for taking my question. You'll be following up on BioPharma comments. How are things trending month by month? Others in the group suggests that there is no positive inflection, but the environment is improving. And finally, I feel like you should be viewed as part of the solution for Pharma customers. Not part of the problem is that messaging resonating.

George Cardoza

Yes, definitively. And I would say to do that this week as well. I'm in, in us and I have a meeting with one of the TOP10 pharma companies in oncology. And definitively, we're talking about you know how we can help them in their precision medicine strategy starting with a decentralized testing. And second with the access to data from access market access needs. So I think that the position of Sophia is a position that is definitively fit for purpose of the current constraints that the bio form are are going to. But as Ross said that this requires building a pipeline, right? And so we're being laser focus on working only with the BioPharma companies who are strong in oncology and where our portfolio applications and network would be complementary to their current needs.

Sir Banbi

Thank you for that. And last one for you, you guys are making good progress with operational spending discipline and reducing burn any initial parameters on where this can go over the next year.

Ross Muken

Obviously, we are still very committed on our path to profitability, I think relative to the progress that we've made, it's been steady, right? And I would say probably even a bit more impressive frankly, given we obviously had some revenue challenges this year. So we have obviously held the loss guidance despite the revenue shortfall, been quite nimble, right? And how we've managed the cost base. And I would say even more. So you can see some of that benefit on the cash line, which at the end of the day is probably the most important. And so I look forward with, with George joining us. Now, he obviously has a great history in this as well to partnering in this path to profitability and, and we continue to be able to show you sequential improvement and continued and some proof points that we would get to the other side of the cash generation and, and move towards the self sustainability. And so again, for us, this is obviously a paramount focus and, and one that requires obviously as well a great deal of balance, right? Because obviously when you're trying to grow your OpEx effectively, there's always sort of trade offs. But I think for us, we continue to pull the right levers to make sure that continued progress is evident to you guys.

Sir Banbi

Thank you guys. And can I squeeze in one more? Given the oncology market that is larger, is there differences in how your sales force focuses their effort for oncology versus rare diseases? Basically, is it one sales force or have you separated them into two separate spaces?

Ross Muken

So, in terms of the sales force construction, you know, we tend to have almost a pod based model in most countries where you have folks that sell the full suite of menu of applications. And then technical engineers that kind of specialize specifics of the product, but I would say in general, everyone sells the full portfolio. We tend to be more of a discovery based model, right? So we, we sort of well understand our customers of, I would say pain points considering you know, just the general, I would say state of things in oncology in terms of the, the amount of innovation and change and the dynamic products we're bringing to market like MS K access and impact and our hr d capability. Obviously, sales people are smart and they also focus where they see the most opportunity. But frankly, you know, if you look today, our pipeline is quite balanced. You know, obviously, Pharma is far more interested on the somatic side of things than on germline or or rare disease. But overall, I'm, I'm quite happy with our, our focus and, and where our R&D dollars are going and I think our sales force is really well suited to help the client no matter their their need or pain point.

Sir Banbi

Perfect. Thank you guys.

Operator

I'm from R BC capital market.

Jurgi Camblong

Hey guys, thanks for the question source, Ross congrats on the new job and George, welcome to the team.
First, just on clinical, on the clinical revenue side, volume growth remains healthy, double digits for you guys. But a lot of investors in the space are concerned about an overall market slowdown in clinical sequencing volumes over the medium and longer term. Have you seen anything in the marketplace from a technology or reimbursement perspective that could potentially change the trajectory of clinical volume growth for you guys, either positive or negative.

George Cardoza

Yes. Hi, Connor. Good morning. And indeed, congratulations to both Ross and, and George. I'm very excited about having them in the team and having Ross with more responsibilities. So when it comes to the clinical market, we haven't seen what you describe so so far, actually, what we're seeing is rather, you know, about which type of instruments they will invest in, whether it's the leading traditional one or an alternative. And in terms of volume of analysis, as you pointed out, you know, we have seen a re acceleration, maybe ROSS, you can give a bit of color of where we see the the the volume coming from and from and where it is growing the fastest.

Ross Muken

So I think if you look at us from a global perspective, obviously North America for us remains a really robust market and one in the US, that's I think quite promising. And if I look at as well, my pipeline there as well as our our bookings potential. I'm, you know, probably for, you know, the four years I've been at this company, the most optimistic of where we are in the US market. So I think we, we see quite a lot of runway there for us. Asia Pacific for us as well has been quite robust, you know, growth this quarter was nearly 50%. And so obviously, a lot of new areas for us to penetrate there but but quite good demand, you know, am or Europe in general and growth in places like Germany, the UK, Middle East, et and so there as well, it's quite and then Latin America for us at the moment is kind of an interesting dynamic. Underlying growth is I would say stable, but we had one customer turn earlier in the year due to an acquisition. So that's I would say skewed our results all year. But but frankly, if I look across the portfolio and if I look again at my pipeline and my bookings globally, volume growth for us at least is expected to be quite good. I think maybe what you're hinting at is a dynamic in the market around sort of the trade off of pricing and volume around some of the traditional pieces. If you think about an entire workflow, we obviously comprise a smaller percentage of the total pie than say an instrument or flow seller, consumable, etcetera labor cost. And I think for us, the most sensitive factor is volume and data production when you look at the most and feel quite confident. And I would say volume as well as part of that data production is both a mix of higher patient volumes but also the complexity of the test, right. So moving to AC GP or liquid biopsy, MRD, et cetera, this is much deeper sequencing. And so for us, it means much more data production, which is quite positive, you know, what happens to sort of instrument ASP S or flow cell, you know, as a percentage of the total mix that I can say. But I'm quite confident for us, we will continue to eat up a bigger piece of the pie over time with what we're able to do.

Jurgi Camblong

Great, thanks for that color, really appreciate it. And then on the BioPharma side, most life science tools, investors are well aware of this dynamic of cautious spending by BioPharma right now. And just if you look at your your push out in in BioPharma revenue, how much of that push out as a function of this potential competition from, you know, other A I vendors for Pharma in A I investments for drug discovery.

George Cardoza

Yeah, thank you Connor. So it's definitively spending dynamics and because just taking a step back, the the why Pharma would work with Sophia is because of our network, right, which is distributed and in particular our network of customers outside the US where definitively we have a competitive advantage as you know, we we serve over 700 plus hospitals around the world, right, which are really tier one university hospitals and comprehensive cancer centers. And so when Pharma is thinking about post approval activities for market technique access needs, which is for example, you know, more patients being tested molecularly or whether when it comes off reimbursement, strategical considerations on the basis of real world data there, we're very, very well positioned with our network versus other peers. So we don't really have competition, I would say outside the US, which is our main advantage for the BioPharma. So it's really what you describe as being basically budget constraints from the BioPharma that for example, have made activities on the preapproval side a bit more complicated and hence we focus on post approval activities since June of this year.

Jurgi Camblong

Great, thanks for that color. You're really appreciate it.
Thank you, Conor.

Operator

There are no further questions at this time. I now would like to turn the call over to Mr Jorge Klum, our CEO and cofounder for final closing calling.

Jurgi Camblong

Thank you very much for joining us today. Thank you as well to the teams of Sophia. We have been working relentlessly to deliver a very good numbers when it comes to our cash burn year on year. And well again, welcome George and congratulations for next week on Monday and Tuesday at the Google and Health Care Conference in Boston. Thank you. Have a good day.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line. Have a great day, everyone.