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Progenity Inc. Common Stock (PROG) Q4 2020 Earnings Call Transcript

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PROG earnings call for the period ending December 31, 2020.

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Progenity Inc. Common Stock (PROG -0.93%)
Q4 2020 Earnings Call
Mar 18, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Progenity's fourth-quarter 2020 earnings call. At this time, all participants are in a listen-only mode. [Operator instructions] I will now turn the call over to Robert Uhl, managing director with Westwicke ICR, Progenity's investor relations firm.

Robert Uhl -- Investor Relations

Thank you, operator. Good afternoon, and welcome to Progenity's fourth-quarter 2020 financial results conference call. Joining me on the call are Dr. Harry Stylli, chairman and chief executive officer; and Eric d'Esparbes, chief financial officer.

Before I turn the call over to Dr. Stylli, I would like to remind you that today's call will include forward-looking statements within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K that we will file later and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that the actual results could differ materially from those projected in any forward-looking statement.

For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, as well as risks related to our business, please see our periodic reports filed with the SEC. A slide deck with some supplemental fourth-quarter financial information is also now on the website, but it will not be directly referenced by the speakers on the call today. With that, I will now turn the call over to Dr. Harry Stylli, chairman and CEO of Progenity.

Harry Stylli -- Chairman and Chief Executive Officer

Thank you, Robert, and thank you all for joining us this afternoon. We made significant progress during the fourth quarter, both with our revenue-generating business and especially with our innovation pipeline programs. In Q4 2020, we made progress in stabilizing our core revenue business. In addition to revenue cycle improvements that are beginning to strengthen ASPs, we continue to witness strong new customer acquisition and in-network expansion by adding national and regional contracts.

Further, we advanced our discussions for in-network status with our remaining large commercial payors and saw additional commercial and government payors covering average risk NIPT. These factors which will continue to grow in contribution are helping lay the foundation for sustained growth in 2021 and beyond. We maintained a disciplined approach to managing our operating expenses during the quarter through a combination of reduction in force and cost controls while maintaining appropriate resourcing of our key R&D programs. Eric, our CFO, will provide more details later in the call.

During the quarter, we raised $118 million gross proceeds in December 2020 from a concurrent secondary equity offering and issuance of convertible notes. In addition in Q1, we raised $25 million in gross proceeds from a private placement with two leading healthcare-focused investment firms that were drawn especially to our innovation pipeline. We view this increasing investor engagement positively and it allows us to extend investor focus beyond our core molecular testing business and into our innovation pipeline, which is now progressing at an accelerated pace. We were able to see evidence that our core business in the fourth quarter of 2020 was stabilizing and reported 82,000 tests, including 56,000 core molecular tests, and 26,000 COVID-19 tests.

In the quarter, we continued to witness customer turnover primarily due to changes we implemented during 2020 to strengthen our revenue cycle management and our billing process. As we approach the end of the first quarter of '21, the headwind of account attrition due to the aforementioned changes continues to significantly weaken. By contrast, we continue to secure new business with significant success. These new accounts are now increasing productivity and beginning to help offset losses due to account attrition.

I'm also pleased to share that during the fourth quarter, Progenity further increased its in-network covered lives with an additional 1 million lives from new contracts with regional payors. Separately, we're advancing in our efforts to achieve in-network status with remaining large commercial payors. And we're hopeful we can add a significant number of covered lives with access to our product portfolio in 2021, which should lead to a further expansion of our commercial presence. We further expect that our NIPT revenue and ASP will gradually improve as more payors begin to reimburse for average risk NIPT.

Several key commercial payors, including more recently like Centene and Humana, as well as multiple state Medicaid programs, have begun offering coverage for average risk. As a result, many of our payors currently cover average risk, and most have indicated that it's a permanent shift in their medical policies. We expect that a rising ASP for average risk NIPT will make an important contribution to our revenue as it represents a significant and growing aspect of our products mix. As a reminder, in September, we expanded our carrier testing screening menu to better align with payor medical policy coverage, which we believe will also result in improved revenue and ASP in the coming quarters.

We have already converted approximately 80% of our carrier screening book of business to this payor aligned menu. In January, we implemented a patient cost estimate nationally that provides transparency to the patient's responsibility early in the testing process. And this program has further helped drive revenue and expand our business. We expect to begin realizing benefits from these changes in '21, with significant volume and revenue contribution from our NIPT and carrier testing product lines.

We did experience a transient impact from the recent winter storms in Taxes, a major market for us and across the eastern United States. We remain confident that Q1 2021 ASP will show growth over Q4 as we continue to stabilize the business and establish our growth trajectory over the coming quarters. To serve our patients and physicians, we launched our COVID-19 testing nationally within our channel in January. While our core women's health molecular testing business remains by far our priority, COVID-19 testing is helpful to both margins and volumes.

For planning purposes, we continue to view COVID-19 testing as a transient opportunity, and we'll adjust our efforts accordingly to respond to the rapidly changing testing demand dynamics while aiming to maximize the opportunity. We are working diligently to demonstrate that our revenue-generating business is a strong and positive contributor to the success and expect this to become more explicit as we progress in '21. A quick note with respect to our ongoing litigation matters. While we continue to believe than to be unfounded and expect to vigorously defend our position, we're not going to detail on this call and refer you to our disclosures in our 10-K.

Progenity is innovation-driven, and in this regard throughout Q4, we have achieved development and critical risk-reducing milestones across our pipeline programs. During the fourth quarter of 2020, we made significant progress in our development efforts in the field of preeclampsia, a complex syndrome, by achieving a key milestone in analytical and clinical verification for our LDT rule-out test, now branded Preecludia. The test, a multi-biomarker test with algorithmic analysis is primarily intended for use by OB/GYN and MFM physicians to rule out preeclampsia in symptomatic patients. We are pleased with how our assay and platform are performing, and an abstract with data from our clinical verification study PRO-129 was recently accepted as a late-breaking abstract at the 2021 Virtual ACOG Annual Clinical and Scientific Meeting in May.

We have also initiated clinical sample testing for PRO-104, a validation study, which is expected to read out mid-year. During the fourth quarter, we held a Virtual Preeclampsia R&D Day event. During this event, we shared analytical and clinical verification data, as well as perspectives and insights from physicians and patient advocacy groups. The event provided additional understanding about the current unmet needs in managing preeclampsia.

We also provided color on how our test will help to add clinical value by identifying pregnancies that can safely be prolonged, reducing unnecessary pre-term deliveries. In other words, the Precludia test has the potential to improve outcomes and enhance the quality of pregnancy care. We are currently processing and analyzing samples from our pre-validation cohort, a subset of randomly selected samples from the PRO-104 study. The pre-validation sub-set in the PRO-104 study will further challenge the operational readiness of our production systems, further define our target population and expand upon our understanding of the heterogeneity of the broader patient population.

Assuming successful clinical validation, Precludia would be the first and only preeclampsia rule-out test in the U.S. for symptomatic patients in their third trimester of pregnancy. As a reminder, Precludia is a global opportunity, and we also intend to realize that potential in the future. We recently completed research with payors using a third party to better understand how they would characterize the value of Precludia testing.

And we were very encouraged by the findings, indicating their understanding of the economic burden of the disease and our value proposition. More to come on the commercial impact in the future. Our commercial team is diligently preparing for the launch of Precludia in the second half of 2021, including plans for a targeted physician experience program, salesforce training, and marketing campaigns. These activities will increase and accelerate as we move into '22.

Moving through our single-molecule detection platform. We continue to make progress with the development of the platform and its first assay on next-generation NIPT test Innatal 4. As a reminder, we announced in the fourth quarter we had achieved high target specificity across tens of thousands of multiplex single-molecule detection probes, resulting in a measurable dose-response to fetal fraction. This achievement enabled assay integration and initial performance benchmarking.

This capability is critical, especially given ACOG's recent opinion, highlighting the essential need to quantify fetal fraction in NIPT test. We believe that Innatal 4 has the potential to reduce NIPT direct COGS by up to 50%, allow for a faster turnaround time and achieve equivalent performance to sequencing. With these features, Innatal 4 is expected to usher in new opportunities for us to fuel our growth in the NIPT market. In addition to genomic solutions, such as NIPT, our single-molecule detection platform has the potential to detect non-RNA epigenomic and protein biomarkers with high sensitivity and low cost.

The platform will be suitable for additional pipeline projects, including several oncology opportunities in the near future. Moving to GI Precision Medicine. We continue to advance programs into key preclinical and clinical studies, now using fully autonomous devices where available. In targeted therapeutics, we recently announced initiation of an important clinical study for drug delivery system, DDS, which in combination with a drug and proprietary formulation will be used to initially treat ulcerative colitis, and other GI-related diseases.

The Company started its first clinical study with a fully autonomous DDS evaluating the capsules, safety, and tolerability in the gastrointestinal tract of normal healthy volunteers. The study will also collect the first clinical data on the ability of the DDS to also locate and accurately deliver a payload to the ileocecal junction or colon, a key delivery site for the treatment of ulcerative colitis and Crohn's disease. This study will investigate the in vivo behavior of the DDS using the well-established method of scintigraphic characterization. Gamma scintigraphy will be used to validate the DDS GI localization, as well as the drug delivery mechanism using a saline solution payload that includes radioisotopes.

The DDS capsule will be evaluated in a single-dose application in three separate dosing cohorts. Results of the study are expected in the second quarter of this year. If successful, this study will represent a significant milestone and build upon the promising preclinical testing done to date. This will enable us to advance our pipeline for both of our lead candidates, the JAK inhibitor tofacitinib via the 505(b)(2) pathway and the monoclonal biotherapeutic, adalimumab, which we have manufactured under contract.The oral biotherapeutic program, OBDS, for the systemic distribution of biomolecules orally has also advanced, and we expect to update you on our next key milestones shortly, showing for the first time, the performance of our fully autonomous device in a canine model.

We believe that the OBDS platform has a potential to transform how biotherapeutics are delivered orally. In our PIL Dx SIBO program, we continue to advance the technology with ongoing assay validation, and we are on track to initiate a clinical pilot study with fully autonomous devices in the second half of the year. As a reminder, the PIL Dx can perform a range of fluorescence-based assays for a variety of GI-related pathologies, without the need for capsule recovery, with the first indication being small intestinal bacterial overgrowth was SIBO.There are over 100 million annual patient visits with signs and symptoms resembling those of SIBO. In a recent interview, SIBO expert, Dr.

Satish Rao communicated that the PIL Dx has the potential to be the new gold standard for evaluating suspected SIBO patients. Our assay for quantifying bacteria compared favorably to endoscopic aspiration, followed by microbiology, and received the small bowel section award at the ACG conference last October. Our sampling program based on the RSS capsule is designed for both discovery and diagnostics and continues to progress well. Initiation of the first clinical study with fully autonomous devices is on track for the second quarter of this year.

The RSS will enable us to recover preserved microbial, cellular, and omic samples from predetermined known locations in the GI tract. Once the RSS is recovered from two samples drawn from the same location can be extracted for analysis by a range of benchtop systems. We continue to be actively engaged with additional potential pharrm partners as we advance our precision medicine pipeline and expect developments on that front, especially as we generate data with our autonomous devices. With that, I'll now turn the call over to Eric d'Esparbes for a discussion of our financial results for the fourth quarter of 2020.

Eric d'Esparbes -- Chief Financial Officer

Thank you, Harry, and good afternoon, everyone. I'll provide a brief overview of our financial results and also invite you to review our fourth-quarter financial release and our 10-K for a more detailed description. During today's call and in line with our third-quarter call, I'll describe our sequentially quarterly performance, focusing on our third and fourth quarters of 2020. We also include year-over-year performance in our disclosures, but we believe the sequential comparison is more meaningful as Progenity transitions are largely in-network operation, and reflect the impact of the COVID pandemic, which was another factor in 2019.

We reported $14.3 million in revenues in the fourth quarter of 2020, net of a $10.7 million reserve for potential payors settlements. As shown on page 12 of our earnings deck, Q4 2020 revenue before accruals were relatively flat compared to Q3, which is consistent with our prior guidance. While our Q4 volume was slightly lower than in Q3, we started to see some ASP improvements in December before payor settlement provisions, which gives us confidence our revenue cycle management efforts can generate increased ASPs. We believe the vast majority of the operational improvements was implemented last year, combined with the benefits of our increasing in-network position and favorable average risk NIPT coverage by government and commercial payors will all converge to deliver a strong financial performance in 2021.

As a result, we maintained our 2021 overall revenue guidance range. While uncertainties remain around COVID-19 testing demand dynamics, we believe the transition to growth of our core molecular testing business will continue to progress through 2021, and we expect to see the benefits of gradually growing volume demand and rising ASPs. We expect Q1 2021 core and overall revenues to be largely flat compared to Q4 2020 before payor reserves, but we anticipate continued strengthening of ASPs as we achieve stabilization of our business, a trajectory that's consistent with our internal forecast. While ASPs based on our reported revenues appear lower in the fourth quarter, our Q4 total ASP excluding payor settlement provisions effectively increased by 3%, in spite of an increase in COVID test and our volume mix during the quarter.

This was a result of a 10% increase in our core molecular testing ASP, during the fourth quarter, as we are gradually seeing the benefits of our revenue cycle management programs. This positive trend is continuing so far in Q1. Our fourth-quarter COGS and COGS per test decreased slightly compared to the third quarter due to lower volume overall and a shift in volume mix during the period. SG&A expenses were $33 million during the fourth quarter of 2020, a slight decrease compared to the third quarter, largely the result of cost control measures put in place during the quarter, combined with a 9% risk we had announced back in November.

R&D expenses were $11.12 million during the fourth quarter, a 14% decrease during the fourth quarter, mainly the result of stage-gated investment strategies where we allocate incremental R&D spend, based on programs, achieving various de-risking milestones. Our key R&D projects remain well-funded. Fourth-quarter 2020, net loss was $75.5 million, which includes a $10.7 million reserve for payors settlements and $18.4 million charge for change in fair value of the derivative liability associated with a 2025 convertible note we issued in December. Fourth-quarter 2020 operating cash flows were negative $70.1 million, compared to negative $51.3 million in the third quarter.

The main difference between the two quarters relates to $29.6 million in scheduled government and payor settlement payments made in December. As a reminder, we now have $24.4 million remaining in settlement payments, which are payable over the next three years. During the fourth quarter, we raised $118 million in gross proceeds through a concurrent equity and convertible notes issuance and had a cash balance of $92 million at the end of 2020. We believe we have a cash runway that will allow us to deliver improved operating performance and achieve critical R&D pipeline catalyst events into the second half of 2021.

While we remain receptive to additional funding opportunities, we intend to maintain a disciplined approach to securing additional capital. With that, I will now turn the call back over to Harry.

Harry Stylli -- Chairman and Chief Executive Officer

Thank you, Eric. As we look through '21 and beyond, we have many drivers of value creation and revenue generation at Progenity. We believe we will return to sequential quarterly growth, driven by the differentiation of our products and services, and by recognizing the benefits of increasing network coverage and improving reimbursement outlook by average risk NIPT. We're especially excited about the progress of transformational potential of our R&D pipeline as we prepare to launch Precludia and Innatal 4 in our channel.

In '21, we anticipate meeting development and our launch milestones by Precludia and Innatal 4 tests. These products will help further differentiate our core business. We believe that our precision medicine platform will continue to gain momentum as we generate more preclinical and clinical data, initially fueling partnerships as a source of non-dilutive capital and ultimately, products and services that address high unmet need and vast markets. Progenity is well-positioned for compelling value progression in the coming months and years.

With that, operator, we're now ready for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] First question comes from Steven Mah with Piper Sandler. Your line is now open.

Steven Mah -- Piper Sandler -- Analyst

Oh, great. Thank you. And Harry and Eric, thanks for taking the questions today. A couple on the payors.

Could you give us a little bit more color on your current in-network transition, billing, revenue cycle management efforts? You said account attrition is weakening. But when should we expect these issues to be behind you? And are you expecting more customer turnover this year? And then, finally, can you give us an update on the Anthem and United in-network discussions?

Harry Stylli -- Chairman and Chief Executive Officer

OK. So, Steve, this is Harry. A couple of things. One, there'll always be attrition in one's business, and that goes for anybody.

However, the attrition due to our efforts last year, we expect it's essentially winding down to zero or close to zero by the end of this quarter. So on a go-forward basis, we should really start seeing and getting visibility on the underlying volume growth. And that's based on the significant new customer acquisition we've made in the last couple of quarters. So I'll stop there, see if you've got any more questions about that.

The other part of the question was revenue. As you transition from out-of-network to in-network, the business model changes. And what was working for us in the past is no longer sufficient in the present, as we are now predominantly in-network. And we've got the opportunity to actually implement a whole range of initiatives which we have been and will continue to do.

That will just drive liquidation which will appear as ASP and ultimately rising revenues. And I believe we're just beginning to harvest the fruits of our investments today. And there's a lot more to come, OK? So that gives you a sense. And we've highlighted a couple, but there are numerous efforts that are being directed, to achieve enhanced liquidation and take full advantage of the in-network opportunity.

And that's that part of your question. And then we are advancing our discussions with both Anthem and have recently reengaged with United. And I would say, things are moving as expected. And as we said in the past that it's quite likely that we reach resolution and in-network status with Anthem, hopefully, in the next couple of quarters, but that's never absolutely predictable.

As we see that happening, you could expect us to increase investment in sales to take full advantage of the 44 million lives that will be available to us. And of course, this is predicated on things continue to go well. And we reengage with United. And hopefully, it's not this year.

Next year, we can build on our relationship with them also. And that's really the last two major commercial payors that we have in front of us in terms of completing the in-network transition.

Steven Mah -- Piper Sandler -- Analyst

OK. Great. Thanks for the color. And maybe one more on NIPT, and maybe this is for Eric.

You mentioned, there's some tailwinds following the ACOG guidance change. And you've observed that, and you expect to continue to observe that. But on the revenue recognition for average risk, are you going to be booking those revenues on an accrual basis, or do you need to build up a payment history with those that are our newly covering average risk?

Eric d'Esparbes -- Chief Financial Officer

Yes. It's the latter. You need to build a liquidation pattern before you start recognizing that higher ASP on all new volumes. That's basically the rules.

The good news is that we're seeing that improvement already in December, the core. And the trend continues in Q1. So we're already ahead, if you want, of our original plan, if you look at a guidance, average ASP that we had got to. So we're very happy with that trend.

Steven Mah -- Piper Sandler -- Analyst

OK. And you think it's going to be six to nine months to kind of build up that payment history?

Eric d'Esparbes -- Chief Financial Officer

Yes. It will continue to build over time, absolutely. And you combine this with new payors gradually adding coverage. And as Harry talked about, if you add additional in-network coverage, then all of this leads to less friction in the process to basically get reimbursed for the test.

So we see this very positively.

Steven Mah -- Piper Sandler -- Analyst

OK. Great. I'll hop back in the queue. Thank you.

Operator

Thank you. Our next question comes from Catherine Schulte with Baird. Your line is now open.

Catherine Schulte -- Baird -- Analyst

Hey, guys. Thanks for the questions. I guess, first, I appreciate your comments on starting to see some bad account attrition winding down. Can you just talk about any monthly volume trends for NIPT in carrier screening that you saw in the fourth quarter and so far in the first quarter?

Harry Stylli -- Chairman and Chief Executive Officer

You take it, Eric.

Eric d'Esparbes -- Chief Financial Officer

Yes. So we saw positive signs at the end of the year, in terms of volume demand profile. And that trend seems to be also very positive in January. As Harry mentioned a little bit earlier, we did have some weather disruptions that did affect a little bit patient behavior, if you want, but also the ability to operate labs.

When you have a few states abuse power, basically, it just affects it, if you want the trend. So that's why we kind of updated our guidance for Q1. But the overall message there is that we're seeing really good trends starting to build up, especially in terms of the new accounts that we've been winning, gradually adding demand in terms of volume. So all of this is basically gradually coming together.

Catherine Schulte -- Baird -- Analyst

On the $10.7 million of accrual you took in the fourth quarter, I believe the initial amount that Anthem has talked about was around $27 million and you talked about, hey, usually you can settle those for less than the original amount. But how confident are you that that $10.7 million number is the right number?

Eric d'Esparbes -- Chief Financial Officer

So I would say we are very confident that this is a reasonable accrual. We use our best judgment, based on the status of the negotiation and the discussion so far. So we have a high comfort level that this is a good base to use as a reference.

Catherine Schulte -- Baird -- Analyst

OK. And then maybe the last one, we'll spend some time on the precision medicine side. Just any update on how the final collaboration you signed for OBDS last August is progressing so far.

Harry Stylli -- Chairman and Chief Executive Officer

Yes. It's actually advancing to the preclinical stage, which we expect to engage in toward the end of the second quarter. OK. So it's moving very nicely, great interaction with both, the strategic oversight group there, as well as the project team.

And we are making great progress. And that's basically it. So hopefully soon. We will gain more visibility because we, hopefully, share more in a public context.

Catherine Schulte -- Baird -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Sung Ji Nam with BTIG. Your line is now open.

Sung Ji Nam -- BTIG -- Analyst

Hi. Thanks for taking my questions. Harry and Eric, when you guys talk about gaining new account, could you maybe talk about what's driving value displacing competitors there and kind of what kind of efforts you are making in order to drive that?

Harry Stylli -- Chairman and Chief Executive Officer

Yeah. So in every case, we are displacing competitors. And so, these are accounts we're winning in direct competition. If you recall, when we talked account attrition, these are accounts that we're literally losing, they're ending up with competitors.

But we're losing them. We're not losing them to the competitor in the directions. But in this case, we are securing business directly from competitors at a pretty high rate for us. And the reason why we're doing this is probably multitude reasons.

But obviously, we believe our products are differentiated. Our services are differentiated. And increasingly, we're using sophisticated tools that help us target the needs of accounts and physicians in a much more, if you like, rifle shot kind of a way than we've been able to do in the past.

Sung Ji Nam -- BTIG -- Analyst

OK, got it. And then I don't know if you're able to talk to your customers about Innatal 4 yet, but we'd love to hear any feedback you might be getting kind of from potential customers, in terms of the value proposition of that.

Harry Stylli -- Chairman and Chief Executive Officer

We had preliminary, if you like, discussions with KOLs. And the focus is always on the top-line quality of the data. But they're very excited about the idea of a much faster turnaround. Because there's a demand for that, there's a need among consumers, for very rapid turnaround.

So if I can get that data as quickly as is possible. So I would say, that's where things are resonating with our initial discussions in terms of the advantages, this particular platform will offer. And of course, another advantage could also be coming for the customer but certainly will help us is we anticipate a direct COGS reduction of around 50%. And that would be one of the key drivers to help in our business become breakeven ex-R&D by the end of '22 or into the first half of '23.

So we're excited about that. And that also gives us more pricing flexibility in the marketplace, should we choose to take advantage of it. So we can access more customers through partnerships and other relationships in a cost-effective win-win kind of a way.

Sung Ji Nam -- BTIG -- Analyst

Gotcha. That's very helpful. And then lastly from me, in terms of the reduction in force, obviously, you're looking to manage your costs, but at the same time, you have some new products that you're about to commercialize. So how should we think about -- is this the right size or -- commercial infrastructure that you currently have, or will there be plans to potentially further add more headcount going forward?

Harry Stylli -- Chairman and Chief Executive Officer

The exciting thing is both Precludia and Innatal 4 are in our existing channel. And we've got a relatively mature distribution and support capability in that channel. There will be an opportunity to expand and invest both with additional skill sets to support sales, for example, as well as we get access to more accounts because we're in-network. And the other thing is Precludia is anticipated to open more physician doors and give us access to a lot more doctors' offices, because of its uniqueness and novelty.

And that, in addition to going in-network, will necessitate investment in the sales force to achieve a broader reach, OK? But these would be relatively incremental investments given the scale of our footprint today.

Sung Ji Nam -- BTIG -- Analyst

Gotcha. Thank you very much.

Harry Stylli -- Chairman and Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question comes from Andrew Cooper with Raymond James. Your line is now open.

Andrew Cooper -- Raymond James -- Analyst

Thanks for the questions, guys. A lot has been covered. Maybe just one. We've heard from a lot of the players at this point on the COVID side of things that things have really slowed down, you sort of stuck with your numbers there.

When we think about what that looks like, for the year, is there something you can give us in terms of visibility or contracting, and so what that looks like through the rest of the year? Have you won screening contracts or anything like that that you could shed a little bit of light on?

Harry Stylli -- Chairman and Chief Executive Officer

Yeah. We secured contracts, and I won't go into the details of where we're finding opportunity, for obvious reasons. So we have secured a significant number of contracts. But like you said, for us, this is really an incremental opportunity.

And our focus is the core business, both now and in the long run. And we've been consistent about that that we are taking advantage of this opportunity. And as you know, the dynamics have changed recently. But it's very hard to forecast where we're going to end up through this year.

So you believe in additional ways that will drive demand, and you're going to be in a position to explore those ways as and when they arrive. And then, of course, as the winter kicks in toward the end of the year, the view is there'll be additional spikes. So that's what I would tell you. But recall, this is really an optional opportunity for us.

It provides, provides additional margin and some volume. And I'm going to invite Eric as he's bursting to add to my points.

Eric d'Esparbes -- Chief Financial Officer

Well, so what I wanted to add, Andrew, is -- and that's why we specify the overall revenue range. Because right now, we're already ahead, compared to the guidance on ASP so far. So what we view is that we're going to have a few pluses and minus as you move throughout the year. And as a result, we feel pretty comfortable with the guidance range that we have currently.

We'll give some updates later during the year as things progress.

Andrew Cooper -- Raymond James -- Analyst

No, that's great. Certainly appreciate that it's hard to predict. And I'd much rather see you outperform on the core and some shortfall on COVID if that's what it is. But maybe on some of the core just real quick for a follow-up.

When you're out there and you talk about winning more new accounts, and the excitement around preeclampsia, I think in that there's some unmet need out there. When your sales folks are out there, I mean, what level there's been any changes that you've gotten an award on some of the data and things like that, where, as the demand, and the excitement around Precludia really ramped up as launch is approaching or any changes in sort of how you feel like the market leader perceiving this product over the last several months?

Harry Stylli -- Chairman and Chief Executive Officer

I think it's premature because we've not really promoted it in the channel at this stage. And any excitement or interest is based on whatever we shared with the public today. But I don't know if you've picked up on this. We have an abstract accepted by ACOG code for a presentation in May.

And we look at that as a great sign that the clinical community is paying attention and obviously interested in learning more about our Precludia test. So that's a good sign. We're going to really ramp up our efforts on post-validation study and use the findings, both from our prior studies, as well as validation to drive market education and market reach. And the other dimension of that is to drive clinical utility studies.

And that will also result in a broad education and receptivity of the market. Now, we've engaged payors, and we'll go into this a bit more detail in the future once we turn to commercialization opportunities and initiative -- and this is a second occasion. We've gone back formally to pairs. And we're really excited that we've also got to super-strong representatives of the payor opportunity set, in the form Jeffrey Alter, Sam Nussbaum on a board, and they've been quite helpful.

So, look, the payors seem to really get the economic benefit of the rule-out test. It didn't require a lot of explanation. And there is great receptivity. And that's the other important thing, OK? It's not just education of the physician and the patient.

It is, are the payors getting what you're doing, and are they willing -- are they seeing sufficient value in order to accommodate payment for the test? And the answer is yes. And it's going to be evidence-based. And arguably the most critical piece of a data in addition to the validation study is going to be our clinical utility program that we're going to launch essentially post-validation. So all these events are going to conspire to build, both awareness, educate the channel, educate the market, and ultimately achieve reimbursement.

Andrew Cooper -- Raymond James -- Analyst

OK, great. I appreciate it.

Operator

Thank you. Our next question comes from Dan Leonard with Wells Fargo. Your line is now open.

Dan Leonard -- Wells Fargo Securities -- Analyst

Thank you. So first, a question on the guidance for your core molecular business in 2021. Your run rate is about 225,000 tests in core, but you're guiding for about 300,000 in '21. Can you bridge what went into other forming -- what provides the lift from 225 to 300 in buckets if you will?

Harry Stylli -- Chairman and Chief Executive Officer

I think it's pretty straightforward. One is the attrition that we've experienced due to our building processes efforts is expiring, and that's a very large headwind that will be in the rearview mirror, essentially as we speak. Secondarily, if we're looking at the account acquisition that has occurred, the team has delivered a very significant number of new accounts in the last few quarters. Those are going to begin to kick in.

And that's just about reflecting early on in our numbers, OK? And those two are the biggest drivers. The third is expansion of the sales force, OK, which we anticipate in the next quarter or so. So those are really the drivers that will give us the top-line as we are seeing. And I think it would be, not correct to judge the performance based on recent trends because they were unusual and transient trends, however, significant lever to our business that are basically playing out, basically done.

So I think all these reasons are going to help fuel and drive the business on a go-forward basis. And then on the top -- on the other end is we've already seen -- actually we are ahead. If you look at where we thought our annual ASP would end up for '21, we are already materially ahead of that. Of course, we need to sustain the ASP, but as we hinted and as we pointed to, there are a great many irons in the fire, the yet to play a role.

And we expect, if anything, ASP to harden on a go-forward basis. So those are the reasons. And that, of course, factor in Precludia, which is in our channel. And we'll start right toward the end of the year.

But it will enable us to build up our presence, build up the channel education. And I believe that's going to open doors and potentially result in toll-free menu. But I see that more as a '22 effect with a marginal '21 effect. So those are –

Dan Leonard -- Wells Fargo Securities -- Analyst

And then, Eric, I think you provided some comments on Q1 given weather and all that, but I missed some. What were the comments on Q1?

Eric d'Esparbes -- Chief Financial Officer

Yes. So what I said the reason why we're guiding to a relatively flat quarter is because, in February, there were storms and power outages in Texas and the Midwest. And this is a pretty substantial market for us. So that has a little bit of an impact.

It kind of delayed and postponed certain things, so you don't get all the full benefit of the trends.

Harry Stylli -- Chairman and Chief Executive Officer

I mean, for example, our Avero business in Texas was adversely impacted for, I believe, between seven and 10 days, and FedEx and UPS did not resume services in Texas for at least that period, OK? So yes, you're going to scramble and recover quite a bit of that volume. But you're not going to get all of it, OK?

Dan Leonard -- Wells Fargo Securities -- Analyst

OK. And then just finally, given the importance of average risk NIPT, can you remind us of your core molecular, what proportion of that in 2020 was NIPT, what proportion of that was average risk? And maybe, finally, what proportion you weren't getting paid off? So if you think about the potential lift here.

Harry Stylli -- Chairman and Chief Executive Officer

So that's pretty straightforward. So approximately two-thirds of our volume is NIPT and about two-thirds, 62% of or so of NIPT volume is average risk. And we were being paid on a tiny fraction of our average risk, OK? So I think I've said in the past and I'll say it again, that if we take volume run rates that we were averaging last year, OK, and assume about 100% payment, which is not likely to occur, it might be more like 85%, but then you got to factor in volume growth. We could expect $40 million, plus or minus $5 million to drop to the bottom line and, therefore, be recognized as revenue that's not being recognized today in the coming quarters.

It's a material benefit, if you like, that, again, goes to your first question is, how you expect to grow volume and therefore revenues, and so on and so forth.The other thing we're seeing and we're hearing is that the demand for average risk in the channel is increasing. And that suggests that there was demand -- that there was later demand that was probably being served by serum testing that now because of the ACOG guidance, those physicians are feeling more comfortable about prescribing average risk for their patients. So we're seeing evidence of that, too, in the last few months.

Operator

Thank you. I'm not showing any further questions at this time. I'd now like to turn the call back over to Harry Stylli for closing remarks.

Harry Stylli -- Chairman and Chief Executive Officer

Thank you all once again for participating on the call, and thank you for your interest in Progenity. If you have any additional questions, please feel free to contact us. Have a good evening or good afternoon, everyone. Thank you.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Robert Uhl -- Investor Relations

Harry Stylli -- Chairman and Chief Executive Officer

Eric d'Esparbes -- Chief Financial Officer

Steven Mah -- Piper Sandler -- Analyst

Eric dEsparbes -- Chief Financial Officer

Catherine Schulte -- Baird -- Analyst

Sung Ji Nam -- BTIG -- Analyst

Andrew Cooper -- Raymond James -- Analyst

Dan Leonard -- Wells Fargo Securities -- Analyst

All earnings call transcripts

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