Fulgent Genetics Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lu Li - UBS - Analyst : This is Lu on for Dan. I guess like first thing, definitely great momentum in Precision Diagnostics and AP business, two quarters of growth. I'm wondering, how do you think about the trends in the next 12 months?

Question: Lu Li - UBS - Analyst : Yeah. Just like how do you think about like going into 2025?

Question: Lu Li - UBS - Analyst : Great. And then talking about the VA contract, it's $99 million over five years. Should we think about like any kind of like big contribution in '25? Or is it like just simply divided by 5? And then also in terms of like the pipeline for that contract, do you see anything that will coming up like in the next 12 months as well?

Question: Lu Li - UBS - Analyst : Got it. Switching to the OpEx line. So SG&A roughly flat sequentially, but R&D is -- I mean, also sequentially declined. I'm wondering like what were the changes in the quarter? And then also, I guess, like maybe you also mentioned the gross margin for kind of like in around 40% -- like 40% in Q4. I'm wondering, is that like a jumping off point for '25 as well?

Question: David Westenberg - Piper Sandler & Co - Analyst : So you mentioned all three business segments in lab contributed to growth. Can you remind us about the strategy change you had in Anatomic Pathology? It does seem like it's working. Do you see this as kind of completely fixed? And then as we think about that business on a go-forward basis, how should we think about growth? It's still a more mature market, so I would guess it would be below company rates.

Question: David Westenberg - Piper Sandler & Co - Analyst : Got it. And then I just want to -- sorry, Ming, go ahead.

Question: David Westenberg - Piper Sandler & Co - Analyst : Got it. And then just in terms -- I want to go to the OpEx and maybe get Paul involved here. Is there any additional OpEx associated with the VA contract that we should expect before, say, the revenue hit? I'm just trying to kind of think about the way you're going to be preparing for that. And then also in the OpEx questions, how should we think about the capital expenses you made on the Texas facility this year on other parts in the OpEx, like I'm guessing that's going to be maybe fixed costs that can help you with some of the stuff associated with the gross margin improvement or things like that. And maybe some -- yes, G&A in the lab.

Question: David Westenberg - Piper Sandler & Co - Analyst : Got it. And then just the last one, and I don't know if you guys disclosed this, but I think it might be in the Qs. Just in terms of end market by payer, are you doing a lot of stuff inpatient versus outpatient and or running lab for -- as a provider for other labs. If you can give us kind of a breakdown of that. And there's two things I'm trying to get at with that. Generally speaking, I mean, like there's not been as many true-ups with your business versus what we're seeing with Guardant and Tempus and all the other ones that are getting a lot of those billing in prior -- from prior quarters. But then I also just want to get your sense for -- as some of these payers, there's maybe some expectations in the coming years that they're going to be a little bit more conservative with payouts potentially. So I just want to know about your exposure in some of those. And that will be my last question.

Question: David Westenberg - Piper Sandler & Co - Analyst : No, I'm on. That was the last of my question. Sorry, I thought that was the end.

Question: Andrew Cooper - Raymond James & Associates - Analyst : Maybe just first, a lot going on in the space over the last week or so in general. So any change or any opportunities you see with M&A occurring in particular that you could call out? And then I also want to talk about just recent coverage decision or change in coverage for pharmacogenomics. That felt like an area you were highlighting a little bit in the VA announcement that, that was included. So just would love to hear sort of how you think about that space and if there's anything that's changed since that announcement with United's decision not to cover.

Question: Andrew Cooper - Raymond James & Associates - Analyst : M&A (multiple speakers) any change there?

Question: Andrew Cooper - Raymond James & Associates - Analyst : Sorry, I actually meant for M&A. That's helpful. But I actually meant, is there any potential disruption to others where you could pick up share if the landscape changes at all competitively with Ambry under the broader Tempus umbrella at this point as they try to build up a little bit more fulsome of an offering?

Question: Andrew Cooper - Raymond James & Associates - Analyst : Okay. Helpful. And maybe just one last one on the VA contract again. Just want to be clear. So the up to $99 million I mean, are we thinking about this right to think it's really kind of a hunting license now for you to go to these VA clinicians and say, hey, we are something you're able to order, have sort of reimbursement and an established relationship, but it is incumbent on you to go create that volume that maybe is easier with the contract than without or just how do we think about that? And maybe if you could give us a sense, how much revenue were you generating from the VA prior to this news? And is this entirely incremental to that or perhaps a little bit of it is growth along with that?