Fulgent Genetics, Inc. Q1 FY2025 earnings call

• Core laboratory services business had strong start to the year. - Clinical pipeline progress: FID-107 phase two clinical trial in combination with cetuximab in head, neck, squamous cell carcinoma is progressing well with 17 patients treated and 23 enrolled, projected phase two cost ~$10M; FID-202 set to begin phase one trials in next few weeks, projected phase one cost ~$8M. - Laboratory services business: Precision diagnostics growth led by reproductive health, legacy diagnostics, and Beacon; anatomic pathology delivering excellent quality and turnaround time, digital pathology progress; biopharma services with business variability due to contract timing but positive momentum with new initiatives like hereditary cancer testing with VA and partnership with Foundation Medicine.

Precision Diagnostics saw year-over-year growth of $6.7 million or 17.8%, Anatomic Pathology grew by $2.2 million or 9.5%, and Biopharma Services increased by $1.4 million or 51.3%. Precision Diagnostics was up 1.2% sequentially, Anatomic Pathology was down approximately 3.9% sequentially, and Biopharma was down 33.7% sequentially from the record fourth quarter. Precision Diagnostics growth was led by reproductive health services, legacy diagnostics, and Beacon expanded carrier screening. Anatomic pathology lab delivers excellent quality and turnaround time, and digital pathology has seen over 85% of slides digitized with over $1 million in digital billing in Q1. Biopharma services continue to perform well with a deepening pipeline.

• Core revenue expected to be ~$310 million in 2025, a 10% year-over-year growth. - Non-GAAP gross margins for full year to slightly exceed 40%. - Non-GAAP operating margins expected to be approximately -15% for the year. - Therapeutics development business associated cash burn expected to be approximately $25 million in 2025. - GAAP EPS expected to be a loss of approximately $1.95 per share excluding future one-time charges. - Non-GAAP net loss per share expected to be 65¢ per share in 2025 excluding stock-based compensation and amortization. - Repurchased ~646,000 shares in 2025 at an aggregated cost of $10.9 million, remaining ~$139.6 million available for future repurchases. - Expected cash position ending 2025 with ~$770 million of cash, cash equivalents, and investments and marketable securities.

• Uncertainty regarding FDA regulation of laboratory-developed tests (LDTs), including potential appeal of court ruling overturning the final rule on LDTs which may impact the business.

Q: On the full-year guide, why not raising the guide given great momentum in VA contract and Foundation Medicine?

A: Paul Kim said they want to be more comfortable before adjusting the guide as adjustments should be considerable, and also monitoring stock buyback mechanics affecting EPS.

Q: For Brandon, how much of Q1 result is from new accounts and base precision diagnostic business?

A: Brandon Perthuis said strong performance was mix of existing clients ordering more and new client wins, with new clients still in onboarding process but showing momentum.

Q: Do you expect to do more buyback in 2025 and M&A potential?

A: Ming Hsieh said they are starting to deploy capital for stock buybacks aggressively and evaluating various M&A options to enhance distribution network and deployed over technologies.

Q: Talk about expected penetration rate and cadence of adoption for FID-107?

A: Ming Hsieh said it's for EGFR positive patients initially in head and neck cancer, with broader exploration once phase two trials concluded.

Q: Thoughts on using capital deployment to expand sales and marketing?

A: Paul Kim said sales and marketing spend expected to ramp up to between $10 and $11 million in Q2, Q3, Q4; Brandon Perthuis said they are hiring salespeople across divisions for rare disease, reproductive health, and pathology.

Q: Unpack precision diagnostics momentum, driven by Nova vs Beacon and other offerings?

A: Brandon Perthuis said Nova not a significant driver, Beacon expanded carrier screening is a driver with new client wins, and rare disease space with RISE RNA integrated sequencing evaluation showing momentum.