Good day, and thank you for standing by. Welcome to the Sema4 Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. . I want now to hand the conference over to our speaker today, Joel Kaufman, please go ahead.

Good afternoon, everyone. Thank you all for participating in today's conference call. Participating for the Company today will be Eric Schadt, Founder and Chief Executive Officer, and Isaac Ro, Chief Financial Officer. Earlier today, Sema4 released financial results for the Third Quarter ending September 30th, 2021. A copy of the press release is available on the Company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities law which are made pursuant to the Safe Harbor provisions of the Private Security Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. Additionally, these forward-looking statements, particularly our 2021 financial guidance involve a number of risks, uncertainties, and assumptions. For a list and description of risks and uncertainties associated with Sema4 's business, please prefer to the Risk Factors section of our S-1 filed with the Securities and Exchange Commission on August 4th, 2021. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of non-GAAP measures to GAAP financial measures, as well as other information regarding these measures, please refer to our earnings release and other materials in the Investor Relations section of our website. This conference call contains time-sensitive information and is accurate only as the live broadcast today, November 15th 2021. Sema4 disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will turn the call over to Eric.

Alright. Thanks, Joel. And thanks everyone for joining us this afternoon. We are pleased to be here with you today to discuss our third quarter results and progress against our long-term strategic goals. I will start today's call with an overview of our operating results including our growth, and our growing health intelligence information platform, health system partnerships, and new product offerings, before I pass the call over to Isaac for a financial update. We will then open the call for questions. Overall, I'm very excited by our organizational progress in the third quarter, which was largely a quarter of investment in our operational foundation for growth across all facets of our organization. As you can see from Slide 8 of our earnings presentation, exiting the quarter, we have started to see these investments translate to a notable acceleration in volumes and patient and provider engagement with our platform, accelerating our momentum as we progress into 2022. We are building a unique Company focused on delivering clinically actionable insights based on individual longitudinal data analyses that will help inform clinical decision-making across a broad spectrum of diseases and health conditions. Since we became a public Company in July, we have ramped up our investment in technology, infrastructure, and people. The strategic roadmap for Sema4 is anchored in high dimension large-scale patient data, active clinical engagement with patients and their physicians, and collaboration with our clinical and research partners and patients. We fundamentally believe that genomic data combined with clinical patient records and other multi-omic and lifestyle data can deliver differentiated insights that drive clinical decisions to help ensure the best outcomes for patients. Our success is underpinned by our access to expansive data, and by Sema4 's proprietary health intelligence platform Centrellis, among the largest, most comprehensive, and fastest growing…

Thanks, Eric. Turning to our third quarter 2021 financial results, total revenue for the third quarter of 2021 was $43.2 million, representing growth of 12% compared to $38.6 million in the third quarter of 2020. Diagnostic test revenue was $41.4 million in the third quarter of 2021, up 9% as compared to 37.9 million in the same period prior year. COVID testing revenue in Q3 was 4.2 million, down 21% year-over-year and down 8% sequentially from the second quarter of 2021, Excluding COVID -19, total revenue for the third quarter was up 17% year-on-year. Turning to volumes. We resulted approximately 70,000 diagnostic tests during the third quarter of 2021, excluding COVID-19. That was up 36% compared to the same period in 2020. We recorded 166% volume growth in oncology, and this category now accounts for 6% of our total volume, excluding COVID-19. Women's health volumes grew 33% compared to the same period in 2020. Other revenue totaled $1.8 million in the third quarter of 2021, compared to $0.7 million in the third quarter of 2020. The increase was mainly attributable to growth in collaboration service activities related to new partnerships with pharma. Cost of services was $58.8 million in the third quarter of 2021, an increase of 61% when compared to $36.5 million in the same period, 2020. Adjusted cost of service, which excludes stock-based compensation expense was $55.1 million in the third quarter of 2021 compared to $33 million in the same period of 2020. Cost of services were impacted by the rapid scale-up of lab infrastructure to support continued growth in our testing volumes, and the launch of our latest Expanded Carrier Screening product. We are excited about the growth prospects of the business, and believe these upfront investments are critical to realizing that opportunity. Operating expenses for…

Great, thanks, Isaac (ph). We're making substantial progress as we work to build and leverage the digital universe of data to make precision medicine as standard of care for health systems, as well as patients and providers. With our future investment plans, we are confident we are on the path to long-term sustainable revenue growth. I would now like to open the call to any questions, Operator.

Thank you. . Our first question comes from the line of Brandon Couillard from Jefferies. You may begin.

Thanks. Good afternoon. Starting with Isaac. A couple of questions. Could you just elaborate on what exactly the non-core tests are that you performed that were -- that came in below expectations in the third quarter, were a negative 400 basis point drag to volume. Just curious to know exactly what those are, and how big that pool of testing volume is in aggregate. And then as we look at the fourth quarter, what's embedded in terms of COVID revenue in the outlook. And should we expect ASP s to step down again sequentially for the core of portfolio in the fourth quarter.

Hey, Brandon, thanks a lot. Sure thing, so it's important to remember the bigger context, which is the franchise was started primarily to serve IVF clinics and those clinics are, as Eric pointed out, very sophisticated customers of all sorts of testing, and the non-core portfolio that we offer, essentially, are non - NGS tests, things like cytogenomics, that are things that get used all the time by those physician users but are not really part of our long-term focus on driving advancements through genomics and data. And so we offer them -- they are typically high volume, low ASP, and therefore lower margin offerings that matter for the customer but maybe are less strategic. That's what they are. And I wouldn't say there was any one handful of categories that were soft relative to expectations in the quarter. It was really the entire basket and lots of reasons why that might be the case. But as we looked at the exit rate again, out of the quarter and into Q4, things really started to pick up across the entire portfolio. So we really did feel like where our team -- where we asked the commercial team to focus in the core portfolio, they did a great job. And in these other areas, they come along for the ride. And so that's kind of where we are with the mix in portfolio. In terms of COVID, we're assuming about $3 million of revenue in Q4, which obviously it's a pretty dynamic environment for COVID testing, that's our current expectation. And as we've said in the past, we're very proud of the position we have serving our local communities and broader customer base in that business. But it is not a long-term area of strategic focus for us.

Just a high-low, would you level set us on where we stand in terms of the reimbursement process, how discussions have progressed on that front, and we're kind of your expectation that perhaps we begin to see the ASP trend bottom out kind of by mid next year that you alluded to in terms of some milestones on the oncology flunk?

Yes. That's exactly right, Brandon. So in general, on reimbursement, I'd say there are puts and takes there that together lead us to our expectation that 2022 will be far more stable reimbursement year than this year has been. We're most of the way through the contract conversations that we touched on last quarter and that's something where we feel very good about, the path to driving upside over the long term. You may recall that we still do not have proper reimbursement for our Oncology portfolio, and those tests are actually gross margin negative until that gets sorted. So there's a huge opportunity for the Oncology business to be a tailwind, both the ASP and gross margin, as we get that reimbursement put in place in 2022, which is why we called it out in the script. And in the meantime, I think if we just get reimbursement in line with the market rate on ECS, we'll be just fine. And that's exactly the path that we're on. So no change there, but it is not something that happens overnight. It will be a 2022 dynamic, and that's the core focus.

Got you. And then last one, maybe for Eric (ph). You alluded to the other part of business kind of growing substantially next year. Just curious how that side of the business is developed relative to your expectations and perhaps what the current pipeline looks like in terms of the nature of conversations with new biopharma partners?

Yes. So we have a number of very exciting engagements with the bio pharmaceutical industry today. So we, for this past year have been really focused on engaging pharma around the expansive data that we have on patients in addition to more research-based drug discovery collaborations, I would say that a lot of the collaborations that we were sort of being test-driven, I would say. Biopharma around like real-world evident study, clinical trial matching, could we deliver. And the success coming out of those is delivering a very strong pipeline of potential follow-up deals that will be more substantial. So we're very confident that in the coming year, that we're going to be able to close on way more substantial, deeper relationships with pharma. And I would say that our -- the strategy becomes one similar to the Health System kind of partnerships where we're seeking deeper, more holistic engagements, the same is true on the pharma side. I've really being attracted to those pharma companies who are able to leverage all the different aspects of our patient engagement, the data, the models, the testing, kind of being able to deliver a very holistic set of packages across their drug discovery spectrum.

Thank you.

Our next question comes from the line of Max Masucci from Cowen. You may begin.

Hi, thanks for taking the questions. Starting on health systems, it has been 7 months since you launched the system-wide Genomic s program with NorthShore. About 6 months since you broke ground with AdventHealth 's Orlando network. It's great to see the updates around NorthShore. It would be great to hear how NorthShore progress versus expectations and whether you think some of these positive data points on Slide 7 of the presentation can be harnessed as a tool for new wins. And then just separately, if you could just touch on the state of the organization and team that are targeting those opportunities just given some of the recent changes. Thanks.

Yeah. Thanks for that question. So I would say on the Health System engagements, there is a lot that goes on in those, and they -- what we've found easy to get more rapid traction on -- NorthShore is a great example of that, the protocols we've launched with Avera, the genomic -- reanalysis of genomic data for clinical interpretation that we're doing with AdventHealth. The uptake of those genomic testing solutions, the more comprehensive interpretations and the engagement of the system by -- through the physicians, and integrating that with clinical data to make more informed decisions has all gone really well. So those are ones that are maybe a little more natural for the health systems, easier to uptake into system-wide way. And just with NorthShore again, highlighting, we started 6, 7 months ago with that genomic health solution, genomic health screen program being launched in one site comprised of about 10% of the primary care physicians and the success there rapidly expanded to over 90% across all the hospitals in the system. The heavier lift has really come on the data side. So these systems are sophisticated. They have lots of complex data, but they have systems that are geared towards kind of the transactional dynamics, and the system to log patient care received. They're not really structured, or designed for the type of modeling and querying and integration that we would like to do. So we found that to move a little slower as we've had to provide more support on the IT infrastructure side and kind of overcome the natural concerns that a system has with sharing their data broadly with us as a partner. So we think those kinds of learning, so the ability to go in and expand on the genomic testing solution side, work in the different workloads whether it's a population health setting, an OB type setting, or oncology setting. We think those will very naturally scale to many other types of systems. And I would say on the data front, we're still in big learning mode of how replicable, like how transferable those engagements are going to be across our systems. Some parts will be very generalizable, others are going to require more custom development and design. And on the -- I would say on the Health System team, as again a very active area of growth for us. The teams that are needed to support throughout the system, the uptake of these kinds of solutions, all the coordination, and so on is significant. And I'll note, it's not just significant on the Sema4 side, it's significant on that health system side too. There is very significant investment that goes on those systems from the IT infrastructure to clinical care coordination, and so on. That is a big investment on their side as well.

Yeah. Makes sense. And just curious how does the final LCD for MRD monitoring published last week inform how you think about your entry into this testing application, whether it be organically or through an acquisition, and also just balancing your test performance and capabilities with time-to-market.

Yes. So great question, and we think a lot about that. Again, the whole aim for burning into these health systems is again, providing holistic genomic testing platform, and the data sophistication integration to deliver most -- the most differentiated insights, truly personalized precision medicine. What I would say is there are definitely gaps that we have on -- in the genomic platform. MRD would be one of them. And of course, we've been clear that M&A is a key part of our strategy to fill those gaps. And we have a very healthy pipeline of explorations going that span many of the gaps, we think that if we could provide services like MRD in conjunction with our state-of-the-art whole exome, whole transcriptome test, the heritable cancer testing, the drug safety test, and so on will make for a very competitive, holistic precision oncology solution.

And Matt I will just add that as we look at MNA and deploying capital, we're very cognizant that we have to strike a balance between serving the growth strategy and filling up the portfolio and creating value for shareholders. And so as you probably know, asset prices are what they are in this space, they're high. And so we're really trying to be smart about finding deals that we think serve our purpose of enabling data in genomics while also creating value. And so if you think about what we're likely to do first versus what we're likely do over time, I think it's really important that we walk before we run on the MNA front. So I think absolutely we believe that MRD, there's a lot of exciting stuff happening there. We're very aware of some of the favorable things happening on the regulatory front. And we'll aim to be participants in a way that makes sense but that's sort of the framework that we want to make sure we articulate to you.

And if I can maybe make one more point. It's the M&A is one aspect to fill that gap, but strategic partnership is also another way, and we've been pretty clear that we don't have to be able to spin up every single possible test to put into play for a holistic solution. We're happy to partner on that and be the ones who are wiring together that solution for the health system to really deliver that more integrated, holistic kind of care. So strategic partnership will be another .

Great, thanks for taking the questions.

And our next question comes from the line of Mark Massaro from BTIG. You may begin.

Hey guys, thanks for taking the questions. I guess -- I had -- my first question is on the Sema4 Elements. You're rolling out this molecular ancestry genome-wide risk assessment, it's not something that I'm super familiar with looking at carrier screening panel and other women's health companies. Can you just speak to what type of impact you think this will have as you look to maybe win adoption, perhaps competitively from other providers. or do you think this is maybe just a nice bolt-on feature that certain clinicians are asking for but maybe it just serves to strengthen your offering. I guess I'm trying to better understand the differentiation and maybe the clinical actionability of this feature.

Yes. Great, Mark. First, I would say that the current version of our Expanded Carrier Screening test covering over 500 diseases and conditions is among the, if not the most comprehensive, carrier screening test on the market. And where that matters is in the percentage -- the actionability, like what kind of actionability does this provide patients in their reproductive health decisions. And roughly 5% with our current test -- roughly 5% of individuals tested, and remember most of that is in the IVF setting, are -- get identified as carrier couples. If you were looking at like ACOG guideline-based test, that number would be sub 1%. So we're delivering a product that by five-fold increases the actionability enhanced decision-making for reproductive partners. The molecular ancestry component was one I with the head of our clinical lab as a leveraging genome-wide genomic information to improve the residual risk calculations for this Expanded Carrier Screening products. So for example, if you are tested -- take cystic fibrosis. If you are tested and are not a carrier of bad mutations that can lead to cystic fibrosis in your offspring, there is still a risk that you have of passing on something to your offspring that could give cystic fibrosis, it's what's called a residual risk. That residual risk is a function of the population group you inherited that piece of DNA from. And the way that gets assessed today by all others is through self-reported ancestry. So you're asking the patient what's your ancestry. And of course, if we know anything, especially in the U.S. is that the ancestry, the composition, the make up of one's ancestry, it's quite complicated. And not only is it complicated at the high-level, but even if you knew with perfection what your ancestry composition was, you wouldn't know what population group that I inherit that cystic fibrosis gene from. So today, what's being systematically misreported are residual risks based on that self-reported ancestry. And it's why the guidelines like ACMG come out and say ' you should not diagnostic Company be reporting residual risks unless you have this kind of information'. So we're the first to be able to systematically integrate genome-wide level information to provide just a more accurate standards of care. So what we'll increasingly see as we engage that information across all those diseases and conditions, and not just Expanded Carrier Screening, heritable cancer, polygenic risk scoring for cardiovascular disease, depression, anxiety, drug safety, every single one of those depends on, again, the population groups you inherent in that information from. So systematically integrating that is going to lead to superior outcomes in patients that we think will be highly attractive across the spectrum.

Got it.

Sorry I talked for so long

No worries, no sweat. Recognizing you guys are still pretty early as you think about the next 5, 10 years as a Company and how you can address unmet need in Precision Oncology, there has been a rise in the medical imaging, big data, AI type companies that are raising money and perhaps planning IPOs in the future. I guess, Eric (ph), what are your thoughts as to whether or not you think medical imaging can be complementary to similar diagnostic portfolio that you're looking to build out.

Yeah. Again, I love that question because it's -- we think about data in a more agnostic way. While we're generating a lot of genomic data, because it's a special technology moving at super Moore's Law speed, we think about all aspects of data from genomic, to the clinical record data, to imaging data, proteomic, metabolomic, and so on. So we view all of those as central dimensions. And clearly in cancer, the imaging data is critically important. In fact, back to some of the pharma collaborations I mentioned, some of those directly involve imaging base data, abstracting features from those data, integrating them with the clinical medical record data for better diagnosis of patients, for example, with lung cancer. So we have a paper, in fact, coming out on that exactly. So we definitely see integration of imaging data into the interpretation, combining that with the genomic and clinical record data to make superior predictions, we view is a core component that we continue to grow out.

That's great. Last question from me. Obviously, Sema4 was born out of Mount Sinai, which is now a strategic partner. I guess, what does Mount Sinai 's collaboration have that maybe you haven't yet implemented at NorthShore, Advent, and Avera, such that you think that you can increase the standard of care at maybe the other 3 health systems.

I would say, again, it's back to my earlier comment on the easy and the hard with the health systems that we're seeing today, like with North Shore, and it's that the engagement around the data, the magnitude of those data, the structured from the unstructured data, the integration with pathology nodes, and the imaging data that you mentioned. Like, I would say we're much further ahead, more advanced with the Mount Sinai Health System and so able to provide across a broader range of areas from auto-immune to cardiovascular, to OB - GYN to oncology utility back to the system across those different areas. And we think -- what we're learning is that it takes a little more time than we thought it would with these systems. But we think that's all going to come and will drive even more enthusiasm across those systems as we enable them to master that information in this more integrated way. We think, again, it's the mastery of the data, I would say that we're further ahead it. I know it and the others, but we expect there's nothing that holds us back from achieving that same mastery in the other systems.

Great, thanks for all the color. That's it from me.

Thank you. . Our next question comes from the line of Matt Sykes from Goldman Sachs. You may begin.

Hey, everybody. Thanks for taking my questions. I appreciate it. Isaac, maybe just one for you to start out. One of the things you mentioned on the third quarter trends. The first thing you mentioned was that it's still early to reap the benefits of the sales force, but you noted the volumes have recovered a lot at the end of September and October. I am just wondering how much of that is ramping of new sales people's effectiveness versus COVID-related restrictions, or is it a mix of both. And did that ramp at the end of the quarter and into October represent an easing of restrictions or a more effective sales force as they have spent more time in the field.

Hey, Matt. Good question. Thanks for asking. I would say both played into the dynamic we saw this quarter with just the newness of the reps being the bigger factor. I don't have precise science to tell you to the number exactly how much more, but we really did onboard a number of people in the summer months who are just now getting their feet underneath them, so I really do think that's the bigger factor. And having said that, we obviously need physician offices to be open and available and all that. And we are in a bit of uncharted waters here as we enter this next phase, the endemic phase, if you will. So we're very optimistic about what's possible with our reps as we exit the year. But again, I think both factors played into the dynamic in Q3.

Got it. Thanks for that, Isaac, and then, Eric maybe just one for you. I know you've addressed a couple of questions from Mark and Max on this, but I wanted to get at the health systems and maybe an increased level of heterogeneity in these systems when you talked about your ability to scale investments, and you've had to make a little bit more IT investments to help with integration. But I'm just wondering as you're looking at each new health system, and maybe there is a higher level of heterogeneity and different challenges each one poses, Does that inform your selection going forward of new health systems you might approach? I know you are only doing a few but I'm just wondering, has this changed how you're approaching and maybe looking for a more homogeneous health system in order to take better advantage of that scale of investments?

Yes, that is really great question because I think we maybe had underestimated initially the generalized ability on the engagement of the information over all aspects of diseases and conditions. And what we're finding as well, the approaches we use are indeed general the focus of the systems and where they want to champion, what is it that they are looking to impact the patients, where are they losing -- a lot of the systems we're working with like community-based hospitals. Hospital systems that want to compete with academic medical institutions and not lose patients. So they want the others -- so they are very targeted wants, and those wants are, no surprise in the Precision Oncology and population health -- genomic health arenas in addition to rare disorders and reproductive health, where again, we have strong expertise. So I would say in the new systems, that are in process that we think will be able to share things in coming months. They definitely are more homogeneous with respect to the systems we have today, and that was because we did better understand all of the issues in those different areas and the kind of champions -- who the key players were. So I think Oncology in particular, where it's -- there's a bigger appetite for these sophisticated solutions, no matter what system you're at, and so on. The systems taking on more management of the populations, and so having incentive on the population health side. And so I do see those potentially repeating, but we are also going to drive hard with those systems, expanding into other areas like cardiovascular, where we're starting to get some uptake, as well as autoimmune. But yes, I would say the Oncology, Precision Oncology, Population Health, genomic health in rare, rare disorder, where I think of it more on the reproductive health, where we have definitely a rare disorder play or, we're seeing core focal points.

Great. Thanks very much for the color. Very helpful.

Thank you, and I'm not showing any further questions in the queue at this moment. I like to turn the call back over to Eric Schadt for any closing remarks.

All right. Well, thanks --

Thank you.

Yeah, thanks everybody for your interest in Sema4 and a great round of questions. We're pleased to be able to have presented to you today our update on our third quarter progress. We're super excited for what the future holds and look forward to keeping everyone up to date along the way. Thank you.

Thank you. This will conclude our program for today. Thank you for participating. You may now disconnect.