Invitae (NVTA) Q4 2021 Earnings Call Transcript

Invitae (NVTA -72.22%)
Q4 2021 Earnings Call
Feb 24, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Invitae fourth quarter 2021 financial results conference call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] Thank you. Jack Finks, investor relations, you may begin your conference.

Jack Finks -- Investor Relations

Thank you, operator, and good afternoon, everyone. Thank you for joining us for our 2021 fourth quarter and full year results call. Joining us today are Sean George, CEO; Roxi Wen, CFO; and Ken Knight, COO. Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical, including those about future financial and operating results, plans and prospects, focus of our business strategy, plans to integrate and manage businesses we acquire, market opportunities, future product services, our product pipeline and their timing, demand for and reimbursement of our services, and investments in our infrastructure and operations.

These statements constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. It's difficult to accurately predict demand for our services, and therefore, our actual results could differ materially from our stated outlook. Statements on future company performance assume, among other things, that we don't conclude any additional business acquisitions, investments, restructurings, or legal settlements. We refer you to our most recent 10-Q, in particular, the section titled Risk Factors for additional information on factors that could cause actual results to differ materially from our current expectations.

These forward-looking statements speak only as of the date hereof. As you listen to today's conference call, we encourage you to have our press release available, which includes financial results, as well as key growth metrics, and commentary on the quarter. To supplement our consolidated financial statements prepared in accordance with the generally accepted accounting principles in the United States, or GAAP, we monitor and consider several non-GAAP measures. We exclude from our non-GAAP operating results as applicable, among other items, amortization of acquired intangible assets, acquisition-related stock-based compensation, post-combination expense related to the acceleration of equity grants or bonus payments in connection with the company's business combinations, adjustments to the fair value of certain acquisition-related assets and liabilities, including contingent consideration and acquisition-related income tax benefits.

We exclude from our non-GAAP cash burn as applicable, changes in marketable securities, cash received from equity financings and debt, and cash received from exercises of warrants. Non-GAAP measures may include cost of revenue, gross profit, operating expense, including research and development, selling and marketing and general and administrative, other income expense net, as well as net loss and net loss per share, and cash burn. We encourage you to review our GAAP to non-GAAP reconciliations, which are available in the press release and in the appendix of the earnings slide deck, both of which you can access by visiting the investors section of the company's website at ir.invitae.com. With that, I'll turn the call over to Sean.

Sean George -- Chief Executive Officer

Thank you, Jack, and good afternoon, everyone. As you'll see outlined in our call today, we're tapping into something unique at Invitae. Aside from quarterly and sometimes even annual short-term revenue fluctuations, solid fundamentals back our top line execution and we are well positioned to continue that growth in the years ahead, as we hurdle forward to meet the immense unmet demand for the use of genetic information in everyday personal health. Today's call will be numbers and metrics heavy.

So I won't go deep into our full year financial performance, but in summary revenue and volume growth were as expected, growing at approximately 65% and 77% respectively. We finished the year with very strong provider account growth and the addition of almost a million patients to our platform throughout all stages of life. As we continue to develop an integrated solution of health information, digital solutions, and data services that will shape the genomic medicine era. The technology cycle kicked off of the dawn of the genomic medicine, now 20 plus years following the human genome project is presently set to dominate our industry.

The fundamental knowledge the human genome and its impact in healthcare is driving the single greatest shift in medicine in recent history. A shift to where in time most diseases will have a well understood risk that could be minimized or saved off. And if or when they arrive can be rendered a chronic condition to be managed for years or even decades of a customer's life. In 2010, this sounded like science fiction.

But if you take a step back and look out at the genomics landscape, it is coming to focus quickly and a company that can provide the science, infrastructure support, and guidance for customers throughout their own personal health journey can lead this shift with immense impact for customers, providers, and the industry at large. To make this future reality will require investment in time, but we're committed to maintaining sustained high rates of growth and unlocking the value presented by this immense opportunity. The company that can deliver the capabilities I just mentioned will be transforming very large, durable and converging markets in healthcare. What I mean by converging markets is that soon the provision of any single test or result at a given call point will become far less relevant in the ability to provide information in the context of the individual's broader personal health journey.

The general tailwinds for our growth are picking up, coming from rapidly expanding biopharma pipelines, full of genetically targeted therapies, a better understanding of the improvement of health and a cost outcomes, driving private payers and national healthcare systems to adopt and changing perceptions and attitudes about the role of the patient and their own healthcare and engagement from those paying for it. At virtually every major medical meeting, the number of studies linking genetic information to better clinical decisions and outcomes continues to expand. The concept of genomics is a subset within certain medical specialties is being replaced by the understanding that genetics and multi-omic information will be the underpinning for care across all areas of medicine. As for specific drivers of growth over the next two to three years, we see the following.

In pediatric disease, our neurodevelopmental delay offering has recently launched, and we have improvements coming throughout this year in our exome testing, moving to an offering based on the customer's genome. This combined with improving commercial reimbursement and rapidly growing interest in genetic disease from biopharma partners set a great backdrop for growth at this stage of life. In reproductive health, we still see a large unmet need for core genomic offerings, young women having children, our broad offering incoming improvements in ease of ordering, logistics, clinical decision support, and patient services will continue to drive growth in improved health for both mom and baby. For oncology, adding to our leading position in inherited risk for cancer.

This year, we will commercialize a cancer monitoring and therapy selection offering that is as good or better than any of the leading companies in the market. This combined with solid demand for our distributed oncology offering, growing demand for comprehensive precision oncology solutions and attractive reimbursement set us up well for helping more customers understand their cancer risk and be armed with the information to fight and beat the disease. All of our growth across all of these stages in life fuels our data and platform services business. We've recently broken this revenue line out and we expect this part of our business to be an outsized contributor to growth as interest grows in a large network of patients who are interested in utilizing their data with ecosystem partners.

I look forward to sharing much more about our investments in the content, production, digital health tools, and patient own data network capabilities we're building during our technology day in a few months. But for today, we'll focus on the financials. For the first time, we'll be guiding not just to the top line of our business, but also to gross margin and cash burn. We'll also be introducing some non-traditional metrics and key performance indicators for investors to follow on a quarterly and annual basis.

These are the next level of key performance indicators that we run our company again. And we're going to invite everybody to watch these quarter by quarter. This is a reasonably big shift for the company undertaken primarily for two reasons. First, we're building a new category, pursuing a novel business strategy, and it's an ambitious undertaking.

As such, the standard measurement tools used in this specialty diagnostic industry are not helpful in measuring or modeling the business going forward. We are attempting to be as transparent as is useful to help all investors understand how we are thinking about running the business and follow our thinking and execution at a detailed level. Second, we've clocked industry leading growth for many years now pursuing this unique model, pushing past 0.5 billion in revenue will be at one billion and then two, before we know it. The size of the numbers at this point is such that instead of pursuing our unique strategy and growth at all costs, we'll be operating the company aggressively and adding targets for gross margin and cash burn reduction, providing a clear picture of our March toward generating large sustainable cash flows in the future.

I'll hand the call to Roxi to walk us through this year's results and forward-looking metrics.

Roxi Wen -- Chief Financial Officer

Thanks, Sean. And thank you all for joining us today. For the remainder of the call, we'll discuss non-GAAP numbers, including cash burn. As noted in prior quarters, it is easier to understand our business and financials by providing non-GAAP metrics to allow for comparison of the two set of numbers.

We urge investors to review the detailed reconciliation to non-GAAP financials included in press release and at the back of the slide deck. In the appendix section, we also included Q4 billable volumes, ASP, and cost per unit data. Before we move to the detailed financial update, I want note that this will be the last time we provide the blended ASP and cost per unit metrics in our quarterly update. As our business evolves with dozens of products across all categories, each in various stages of maturity, aggregate price and cost data will become less helpful to properly model and assess performance.

Consequently, we'll be focusing our comments on revenue growth, new metrics dashboard, and other selected financial data on a quarterly basis while continuing to disclose our billable volume data as part of our 10-Q and 10-K filings. In 2021, we generated $460 million of revenue and the revenue breakdown was as follows: approximately $281 million from oncology, including germline testing, therapy selection and companion diagnostics, approximately $83 million from our women's health offerings, including NIPS, carrier, and other reproductive tests, approximately $57 million from the rare disease and other testing covering cardio, neuro, metabolic and newborn screening. Data and platform revenue was approximately $39 million. This includes data management, analytics, Data-as-a-Service and certain biopharm and patient identification programs.

We include Q4 performance and breakdown in the appendix of the slide deck. Revenue from all four areas increased nicely in the fourth quarter and across the past three years. Moving down the P&L. For 2021, non-GAAP gross profit was $168 million, which translate to a non-GAAP gross margin of 36.6%, 1% decline from the prior year.

In the fourth quarter, non-GAAP growth margin improved slightly to 36.5% over the Q3 gross margin of 35.6%. Non-GAAP operating expenses was $771 million or 167.5% of revenue compared to $457 million or 163.3% of revenue in the prior year. The operating expenses include costs from newly acquired businesses. As we stated on earlier calls, the rate of growth in spending will come down in 2022.

We're committed to this goal and as we scale the business and manage returns on investment at the total portfolio level. Moving to our cash position, cash, cash equivalents, restricted cash, and marketable securities totaled $1.06 billion at December 31, 2021 compared to $1.25 billion at September 30, 2021. Full year 2021 cash burn was $849 million, including cash for acquisitions or $569 million excluding acquisitions and related expenses. Invitae's business model is highly differentiated and ambitious.

As discussed on the last conference call, we spent the past eight months doing the work and taking the steps necessary to help offer visibility into the fundamentals of our business. Going forward, we'll provide clear visibility to a new set of key business metrics with selected and developed these metrics based on their operational significance and ability to accurately describe returns on investment. These categories include expansion of our current commercial access points through clinics, hospital systems or pharmaceutical partners. Growth of our patient population and patients available for data sharing, revenue for patients for our Testing and Services systems, new product vitality demonstrates our new product developed or acquired over the last three years connects strategic investment decisions to the freshness of the portfolio.

And last but not least is the category of leverage. In addition to the standard opex metric, we will report operating cash flow as a percent of revenue to show scale and improvement. Today, our operating cash flow is consistent with our cash performance by reaching net operating cash is now a due focus with continued rapid growth, so that we can replace the current form of the investment capital with a self-funding model at scale. So these metrics success will not be measured by increasing every category in every quarter and we do not plan to go into detail on every call about every metric.

To be a useful dashboard, they will signal progress, but also trade-offs and even areas that need attention from time to time. Our objective in sharing these metrics is to offer more transparency into a dynamic fast changing business, and to provide a consistent balance perspective on performance. We intend to maintain and publish these as a quarterly update as we move forward. And I will work through a few of the highlights here.

Vendor portfolio growth, our active accounts and active partners. Both increased rapidly over the last three years. Similarly, the number of patients we serve and number of them who are available to share their data have also extended nicely. New product vitality has seen steady growth from 51% in 2019 to 64% in 2021.

Revenue per patient measured by the total platform revenue divided by the number of ordering patients for the period grew from $466 in 2019 to $491 in 2021, primarily driven by expansion of the average member of tests per patient and growth in non-patient specific revenue, including data, platform services and oncology kits. As revenue per patients starts to diverge from ASP, we're encouraged by this early proof point of the future growth potential from the platform we have invested heavily since inception. Moving to operational excellence. Non-GAAP gross margins have experienced considerable downward pressure as compared to our long-term target of 50%.

We have multiple levers in the business that can drive margin extension and we're already taking some of those actions and expect margins to improve in 2022 and 2023. Variable cost productivity measures the efficiency of variable costs relative to the volume growth in the period. Examples of variable costs include lab material, shipping and label. And it is important to note that negative members in this metric represent favorable productivity.

The performance bounced around over the last three years and in 2021, we've seen a recovery from 2020 when COVID significantly impacted volume driving a decline in productivity. Gross margin improvement was held back in 2021 as growth in lower margin products more than offset productivity gains. On the strategic investment front, the trend of R&D as a percent of revenue and capital use for M&A, including both cash and stock reflects our bold investment strategy and growth ambition. And the impact of this investment is partially demonstrated in our top line growth and new product vitality metrics.

As to our guidance for the year, we're providing revenue growth guidance of 40% or approximately $640 million for 2022. As Sean mentioned, the combination of the fast growing accessible market and dynamic opportunity we see for market share capture and strategic activity will always keep our internal growth goals at high levels for years. But we believe the 40% target represent industry leading growth and gives us some room for upside for both organic and inorganic activity. For gross margin, we expect a steady increase over the course of 2022, for the full year gross margin to be in the range of 42% to 45% and exiting the year at a run rate higher than 45%.

This year end run rate margin guidance should showcase our revenue growth and operational improvements throughout this year. And we may choose to discontinue this guidance metric in future years. And finally, our cash burn targets. We're targeting a cash burn of between $600 million and $650 million during 2022.

It is important to note that this cash burn target include any cash we deploy for acquisitions related activities, and that it is a reduction of more than $200 million from the $849 million cash burn in 2021. We also plan to exit 2022 with a cash burn run rate that enables ongoing reduction as we continue driving the business to positive cash flows in the future. Now I would turn the call over to Ken who will tie together some of these metrics results with some core operating factors and programs. Ken?

Ken Knight -- Chief Operating Officer

Thanks, Roxi. Building a pathway to positive operating cash flow was not a burden that distracts us from our core objectives to grow aggressively. In fact, it is positive operating cash flow that will largely replace the capital markets in providing the jet fuel for our industry-leading growth. We were pleased with the trajectory of revenue from 2020 to 2021 and our investments to expand our breadth of products combined with our talented sales teams delivered a nice top line.

But during that same period, gross margins deteriorated as we saw some cost climb with the ongoing global pandemic. We also experienced unfavorable pricing as a result of uneven demand that was constrained by access to patients. And we worked through high variations in supply and demand that drove inefficiencies and required unprecedented agility to protect patient and customer experiences. We were nimble and remain focused on servicing our patients and customers while keeping our people safe.

And it was not easy. However, we also kept an eye on the long-term, we got deep into the integration of ArcherDX and made other strategic acquisitions of Medneon, Ciitizen, and Genosity, which are expanding our product and digital health platform offerings. We see a path to leveraging our breadth to deliver unquestionable value to our customers and have developed a robust list of actions to improve gross margins in 2022. All of these with key leaders assigned who are accountable for delivery.

Recognizing that opex as a percentage of revenue has increased significantly over the past several years, we're taking a more critical approach to spending. To establish priorities for our teams, we developed a list of non-negotiable imperatives against which resources must be applied. This led to an initial resource reallocation exercise, reducing spending that did not align with the imperatives. I mentioned several acquisitions earlier, and we have visibility now more than ever into value generation of our M&A.

We are inspecting our execution, not only for revenue growth, but also for operating cash flow implications. And finally, there is work on the way to inspect our reimbursement, pricing and product positioning opportunities, specifically looking through the lens of improving revenue quality as we grow. So let's move this Slide 17 to look at the framework of how we plan to move from 36% gross margins, exiting 2021 to exiting 2022 at 45% gross margins. The list of exit covers productivity, pricing and reimbursement opportunities, improvements in supply chain and product driven enhancement benefiting from modernization, automation and integration of recently acquired assets.

We recognize the significance of the task at hand and have operating mechanisms in place to continuously gauge our progress. As we shift to Slide 18 in opex, you'll see a significant reduction in the expense growth curve from 70% growth in opex in 2021 to approximately 20% growth in 2022. While 2021 was influenced by development related to acquisitions and by product launches planned for this year, 2022 investment will be earned by the ability for the cost to drive top line revenue or gross margin improvement this year. The necessity for the cost to deliver differentiated patient or customer experience and the alignment of the cost with unlocking our key future imperatives, so yes, there will be trade-offs.

But as you have seen in an earlier slide, we are still committed to growing at an industry leading pace, while maturing the overall business fundamentals. Thanks. And now I'll pass the floor back to Sean for closing.

Sean George -- Chief Executive Officer

Thank you, Ken. We've long shown this ramp view to our business model in an effort to describe how we see pulling forward the future of medicine. Our progress in addressing patients needs throughout their lifespan and the emergence of our platform and data services demonstrate progress up the curve into the genomic network era, where genetic information can be shared on a global scale to diagnose more patients correctly earlier and bring therapies to market faster. The more genetic and other personal health information we can provide, the more patients we can add to our network.

And the more patients in our network combined with other information we can take in on their behalf, the more we and our partners across the healthcare system can do for them. When we started this company a little over 10 years ago, essentially nobody was benefiting from genomic information in their day-to-day health and wellness. 10 years from now, almost everyone will. Current market environment notwithstanding, this is the most exciting time in the most exciting industry transition of our time.

I want to especially thank our employees and the investors who have been with us for years and who support the important work that we're doing. It's the future of medicine and I extend a hearty invitation for anyone not involved to get on board and be a part of that story. Now before we go to Q&A, I feel the need to point out the obvious that while this company and our mission is the most important thing in every waking moment of our lives today, it's really a small thing compared to the global geopolitics being played out at the expense of thousands of Ukrainian Russian people's lives. There isn't really anything more for me to say on that, but we do have over 5,000 Ukrainian customers, as well as teammates and business partners in the region will be tending to.

With that, I'll pass the call back to Emma for Q&A.

Questions & Answers:

Operator

[Operator instructions] Your first question today comes from Dan Brennan with Cowen. Your line is unmuted.

Dan Brennan -- Cowen and Company -- Analyst

Great. Thank you. Thanks guys. I guess maybe the first question, Sean, would actually be on the burn guidance, which is impressive far better than what we have in our model.

Can you just walk through the opex kind of growth? It's a huge step down, and I'm just wondering if you give us a little flavor kind of across your kind of segment to R&D, kind of SG&A and kind of how – kind of what is occurring in 2022 on those line items. And what's the risk that the cuts kind of create a pressure point in your top line growth since this is a pretty material change.

Sean George -- Chief Executive Officer

Sure. Actually I'll let Ken answer the majority of it. I would just – I'll admit, I pay the closest attention to the top and it's a balance. It's getting to – like I mentioned, we're going to be pushing past the $1 billion and then to $2 billion of revenue, the numbers are getting big enough that tending both top, middle and bottom is just makes a ton of sense.

But make no mistake. Our current plan has this industry leading growth for the foreseeable future. There's far more opportunity for growth out there with unlimited capital, we would continue to chase it. But it's just the scale of the company this time makes sense.

I think it's really important to hear from Ken though, he can kind of speak to each line item and give color commentary on that.

Ken Knight -- Chief Operating Officer

Well, thanks, Sean. What I would say is that as we've described first of all, don't underestimate the impact of improving our gross margins. That's, first and foremost is to the focus we have on gross margins. And we have a long list of I think very strong and robust actions that are going to improve gross margins.

So that's going to obviously improve our cash burn. From an opex standpoint, the work we did early on to align to our imperatives allowed us to do a couple things. One is to reallocate some resources. So we did not have to grow as much because we reallocated some resources to the higher priority items that are driving the top line.

So it's actually a good match between driving the top line and making sure we have the resource sources aligned to those priorities. And then secondly, it really boils down to making sure that the deliverables that we have coming out of our development activities are stay on track and with new products that we're launching this year, we feel really great about our ability to grow top line because we have new interests into the marketplace. And so summarily, with controlling costs, but we also are not suppressing our growth. And so we feel good about doing both and I think it's the situation where we can do both and we will do both.

Dan Brennan -- Cowen and Company -- Analyst

Got it. And then maybe kind of a follow-up on the top line. So Sean, the 40% growth it's around where the Street was kind of anticipating. Could you give us some color on the oncology business and why you're not going to break Archer out likely material driver within that growth rate? Can you give us a sense of how we should be thinking about growth in your oncology franchise in 2022? And just give us an update on kind of the Archer products and kind of timeline and any way to think about the impact of those? I guess that would be my second question.

Sean George -- Chief Executive Officer

Yes. And I think it's relevant to oncology. It's also relevant to the rest of the business. So if you kind of first take a step back, our new product vitality which is why we're starting to break this out, which is fueled by M&A.

The new products acquired in the last three years are putting up outsized growth, contributing the top line in whatever disease area you're in, and oncology included. Our core growth – core product growth, our leading franchise inherited testing continues to put a very impressive, very strong growth numbers. So we kind of start with a backdrop the foundation of growth from an industry leading perspective. And add on that, we just recently launched IVD kits for therapy selection globally, in addition to some of the Japanese and other local regulatory approvals that have already been in play.

There's increased demand for precision oncology solutions around the globe, which will drive oncology growth. And in the first half of the year, we're launching our monitoring service, we call it personalized cancer monitoring. And the second half of the year, we'll include in that exome-based therapy selection, all of which is contributing to the oncology group's growth. The decision to not break it out, even just in oncology, it's five or six different key products at least for distinct call points especially when you load in geographies.

And we really do think the best way to look at this is, is look at the oncology top line revenue growth. All of those technology and products will be contributors and will continue to break out that, which is new product versus kind of foundational product offering every quarter here on out. And that's going to tell a story. We're really excited about – obviously, everybody's excited about the precision oncology market.

There's – I saw some chart recently, there's something like 18, four more companies with an offering and screening therapy selection, monitoring. It's an exciting time for precision oncology and we're a little later to the table than most. But I do think given our very strong brand in medical genetics, a very strong commercial presence, I think we've got as chances they need to lay claim to what is going to be a really, really important opportunity.

Dan Brennan -- Cowen and Company -- Analyst

And I'm insisting one more, I know data.

Roxi Wen -- Chief Financial Officer

Goodbye.

Dan Brennan -- Cowen and Company -- Analyst

OK. Thank you.

Operator

Your next question comes from the line of Chad Wiatrowski with SVB Leerink. Your line is now open.

Chad Wiatrowski -- SVB Leerink -- Analyst

Hi. How's it going? Thanks for taking the question. Just related to PCM, what type of data can we expect to see in 2022 with venues such as ASCO coming up? And can you highlight some of the ongoing studies in MRD and sort of how you see these data positioning yourself in the market longer-term?

Jack Finks -- Investor Relations

Just a moment. We lost the speaker line, just a moment they're dialing back in right now.

Sean George -- Chief Executive Officer

Can you hear me?

Operator

We are currently having technical difficulties. Your call will resume shortly until that time, your lines will be placed on musical. Thank you for your patience. [Technical Difficulty] Thank you for holding.

We will resume with the question from Chad Wiatrowski with SVB Leerink. Your line is now open.

Chad Wiatrowski -- SVB Leerink -- Analyst

Thanks for taking the question guys. Just in terms of PCM, I was wondering if what type of data we can expect to see here in 2022 with some upcoming conferences on the horizon. And can you sort of highlight how you view these large perspective data sets with longer follow up times? And how important that will be in capturing market share longer-term?

Sean George -- Chief Executive Officer

Yes. So we've got – I don't have the graph in front of me, we can actually – we can send that out to everybody, but between intercept METex14 work going on the blood pack consortium, there'll be info coming out throughout the year of the performance of the test. Later than a handful of studies going on throughout 2022 – toward the end of 2022 and end of 2023 kind of seven or eight of them that I think are worthy of note. I think this is the kind of thing where, what we know is in the hands of people that are comparing the technologies for sensitivity and specificity and ability to be quantitative.

The technology is as good or better than anybody else out there. The need for – and the number of large prospective trials to bring in kind of guidelines for reimbursement, yes, we're doing those as well. And I think the entire of the space is, is generating enough data there to demonstrate our view in the long run is that the reason that this is going to be applied to every individual battling cancers, because what we know is indeed if you detect cancer coming early – coming back earlier at the molecular level and treat it earlier and adjust that treatment for any new targeted variants – targetable variaints or resistant mutations that show up, the patients live longer. And I think that the sum total of all the research and all the trials pointing to that basic, that basic premise, which again, at first principles level from molecular oncology perspective has already been known for a dozen years or so.

And so to answer your question in the long run, the – all of the data, preponderance of data that shows the utility of these kind of tests is going to drive an amazing amount of demand for them. And then the companies that have sensitivity specificity and the quantitative capability will then be engaged in a market struggle for market share.

Chad Wiatrowski -- SVB Leerink -- Analyst

That's very helpful. Thank you. And just a quick follow up there. In light of those ongoing clinical trials and the commercialization ramp of high end PCM, and some other new product launches, you highlighted.

What gives you that confidence to be able to guide down to a cash burn reduction? And that's it. Thanks.

Sean George -- Chief Executive Officer

Yes. I mean a lot of it Ken covered. And you can see on the slide specific efforts on the gross margin and specific efforts on operating leverage. The sales and marketing right has been showing up.

Last year's a good example with 35% sales and marketing increase with a 65% top line. That will continue G&A leverage. And then a big chunk of it from last year to this year is R&D reduction in total growth. It's still a very large investment in the space.

There's a ton of opportunity to chase. Just metering that against the cash burn that we're doing right now and with the balance sheet, we've got, we feel really comfortable where we are to that end.

Chad Wiatrowski -- SVB Leerink -- Analyst

Thanks again.

Operator

Your next question comes from the line of Brian Weinstein with William Blair. Your line is now open.

Unknown speaker -- William Blair -- Analyst

Hey, guys. Good afternoon. This is Griffin on for Brian. Thanks for the questions.

Maybe just first on gross margin in the guide, I appreciate the higher level commentary on the corporate gross margins. But can you just frame the gross and operating margins on each of the four business segments and ultimately where those benefits for the corporate margins are going to come from?

Sean George -- Chief Executive Officer

Yes. I mean, I think the gross margin overall, Ken walked through the path to the exit rate we want to get to. By business area, this is where there's a reason we don't break it out. And that's because it fundamentally and in actuality is a single platform.

To be honest, it's not quite that simple, but effectively it's a single platform generating the genetic data to deliver these results. Some parts of production generate results for different parts of those businesses. And when you include then where we're going by way of multiple tests for patient, the gross margin per category gets kind of a little bit of losing the force for the trees. With that said, all of the improvements that we were putting in place essentially apply to all of the different business areas.

Obviously, NIPS in reproductive health is a little bit different than a kind of mainline and heritage genetics, part of our production platform. The therapy selection and the PCM, the MRD testing that also is different enough. But then when you start factoring all of the limbs and the sign out and all of the non kind of wet lab production costs, it really does kind of get all mix in one jumble. So a long way of saying essentially, no, we're not going to break out GM by business area.

But really kind of consistent with the way we view the pricing or the kind of blended ASP, it really is – the major – the real game is what's the overall gross margin and where is it trending by the end of the year? And that we have plenty of levers to pull, it's something that we've done over and over and over in past years. And we're confident about where we're going for this year.

Unknown speaker -- William Blair -- Analyst

OK. Understood. And then, you just talked about the transition from a lab and diagnostics company, a little bit more of an information entry company. Ciitizen was obviously a big step there.

But what are the other areas do you think you need to round out to ultimately enable this transition?

Sean George -- Chief Executive Officer

Yes. No. I appreciate the question. And again, I would point out we've kind of been pretty consistent – actually, we've been very consistent with the strategy and what kind of company this is for many years.

I think it's been now seven years or more in the public eye. That little cartoon that we show of our business ramp – business model ramp has not changed much since then. We've always imagined this is a pretty much – it's a new category to really put a genome's worth of information into play for an individual from birth to death is fundamentally more of an information utility than a testing business. We've always been pretty clear about that.

As you've noted, we've commented that we're kind of now in the middle of that that progression. The things that are missing are just continued improvement in the customer experience on not just the ordering clinician side, but on the individual customer themselves, better administrative and kind of ways to tie in with system and governments that are interested in providing this kind of information and managing it on their patient's behalf. There's still much more we can do by way of digital tools and clinical decision support. What we're going to see here in the next two to three years is the clinicians utilizing this information is going to very dramatically move beyond the specialists or the disciplines that have some comfort with genetic information.

It's going to move all the way out into community oncology, all the way out into cardiology, paediatrics and maybe even the primary care setting. And that's where those digital tools and clinical decision support tools are going to be really, really important. You mentioned Ciitizen. I think that this is also something that we think is really important for the increased utility of the information, the more patients, and the more information that we can host and make available to other ecosystem partners, again, with the patient owning and controlling it.

We think in other ecosystem partners across industries can bring their capabilities to bear, helping those patients out and increasing the utility of the information in the first place, which then drives a virtual cycle of kind of what was the old testing business, but then moving forward even more rapidly into an idea that this information can be managed and put to use at the right place at the right time for that patient throughout their life.

Unknown speaker -- William Blair -- Analyst

Great. Thanks for the questions.

Operator

Your next question comes from the line of Tejas Savant with Morgan Stanley. Your line is now open.

Yuko Oku -- Morgan Stanley -- Analyst

Hi. This is Yuko on for Tejas. Thanks for taking our questions. Regarding PCM, could you walk us through your thoughts on how you're thinking about balancing costs and sensitivity with the ability to include perhaps more targets than some of your competitors?

Sean George -- Chief Executive Officer

I'm sorry. The first part was the trade off between which and more targets?

Yuko Oku -- Morgan Stanley -- Analyst

Sensitivity and cost?

Sean George -- Chief Executive Officer

Yes. That's right. That's right. So I think our view is sensitivity, specificity, and being able to be quantitative or probably the most important equally or the most important just behind that is the cost.

And I think that that's where the amp chemistry that we've merged in now to our technology stack from Archer, from the Archer acquisition, has a great characteristic there. It's a very cost effective way to generate that cell-free tumor – ctDNA signature. And yes, kind of lends itself to being able to go to a very large number of variants, which is really helpful. And at the same time controlling on the cost side because and the reason the cost side matters, even though there's very good news in this kind of corner of our business is that reimbursement is extremely high for those indications, for which there is available reimbursement.

On the other hand, it's very clear that it's going to be a little, this is going to be an interesting path ahead as I would predict oncologists and people battling cancer are going to demand this kind of information far ahead of reimbursement guidelines, broadly developing, especially with the commercial payers and certainly around the globe. So this is where the cost basis is going to become really important as we test price out to try to get to all 30 million cancer patients battling cancer in the markets we serve. And just a reminder that the benefit of that is if indeed, which it looks like these patients live longer as a result, and that's good for our customers. It's also good because in the market gets that much more bigger every year those patients live for monitoring services.

So that's where the cost basis comes is really important as we look for in the next two to five years.

Yuko Oku -- Morgan Stanley -- Analyst

Got it. Thank you. And then just to follow up, just to clarify, when you announce entry into cancer screening efforts later this year via organic or inorganic method. Should we assume that effort would lead to step up in cash burn this year from the guide, or is it already contemplated there?

Sean George -- Chief Executive Officer

No. The guide is the guide on cash burn, just to clarify. I don't know if you're referring to this call, our past comments, the early cancer detection is something we're evaluating solely as an R&D effort internal or looking kind of scouting external, but whatever we end up doing and timing their end, it won't affect – it's baked into our cash burn guide this year.

Yuko Oku -- Morgan Stanley -- Analyst

Great. Thank you very much.

Operator

Your next question comes from the line of Tycho Peterson with J. P. Morgan.

Casey Woodring -- J.P. Morgan -- Analyst

Hi, guys. This is Casey on Tycho. So you've previously stated that in five years time, your ex-U.S. presence will double to around 30% of revenues.

Just wondering are the CE-IVD launches of FusionPlex and LiquidPlex that you just announced recently enough to get you there. How much ex-U.S. sales force expansion is needed and what will the impact look like to gross margins?

Sean George -- Chief Executive Officer

Yes. So it's a great question. And it's actually – it's emblematic of the balancing act that Roxi and Ken walk us all through. Let's see.

Is it enough to get us there? Honestly, probably there's enough global demand for that precision oncology distributed solution that it probably could over time. With that said, we still see demand for inherited testing and other around the globe, we have added – on a percentage basis, we've added significantly to the ex-U.S. business development and sales marketing effort. We expect that to pay off.

Now on the other hand also prices are different around the globe and that's something we also meter particularly as we mentioned there this year, we're paying attention to managing carefully, both top three – all three top, middle, and bottom. And that may have a slowing effect on the total of how fast we get to a 30 plus percent of our revenue from outside the U.S. But honestly, I don't think it really changes the story that much. Those are the moving pieces.

We'll continue to invest and receive the benefit of that investment outside the U.S. There's a lot of tailwinds behind it. And we'll continue on, but yes, pricing is lower outside the U.S., and that's just something to factor in

Casey Woodring -- J.P. Morgan -- Analyst

Got it. That's helpful. Then just going back to gross margins for a second, what sort of leverage are you expecting to see this year from some of the recent tuck-in deals like Jungla and the others are sort of tracking as planned there, and then is there anything baked in, in terms of inflation or supply chain?

Sean George -- Chief Executive Officer

Yes. I'll tell you what – I'll answer on Jungla and Diploid. The answer is – short answer is yes. In fact, that continues to help us reduce our cost basis of signing out, ever signing out reporting on and developing patient next steps forever increasing sizes of data sets being generated up to including genome, which we're going to switch over to this year.

And those two acquisitions are critical for both reducing our costs, reducing the bus rate and improving the overall quality and kind of being the – I would claim on the vanguard of medical genetics leading the industry forward. So those two were very important on that perspective, on the rest of the gross margin improvement, I think Ken kind of cover all the major points today on the call.

Casey Woodring -- J.P. Morgan -- Analyst

Got it. Thank you. And then if I can just sneak one last one in, how much cash burn is going toward the PacBio partnership. And then generally, is there anything in terms of milestones for this partnership that we should be paying attention to this year? Thank you.

Sean George -- Chief Executive Officer

Yes. We haven't – we launched that at the beginning of last year. We are not, have not, and are not disclosing the financial arrangement. I mean, we've suggested, look, these things with the milestones we're talking about typically take 5,000 million over three to five years.

When we started it, we thought that fruits of that would come in a two or three year mark, it looks to us as the last Joint Steering Committee looks to us as we're on track for that, getting to the point where a long read genome from PacBio can be very close or replace a short read, or at least kind of be blended in to kind of be offered to every patient coming in the door. That's a longer term objective, looks continues to look technically feasible, continues to look about the timeline we thought, really pleased to be working with them on that. It's a really important development as we've mentioned, there's a lot of disease areas, today, the ones that are known or that there's more information about the diseases that particularly show up early in life. And if you can get increase diagnostic yield for some of these kids, with these undiagnosed diseases, it means a world.

So we're really excited about that and going to continue working with them to try to accelerate that.

Operator

Your next question comes from the line of Matt Sykes with Goldman Sachs. Your line is now open.

Matt Sykes -- Goldman Sachs -- Analyst

Hey, everybody. hanks for taking my questions. I'm sure we're going to probably get more of this at the technology day, but you've seen pretty significant growth in the data and platform segment. And obviously it's still a smaller portion of your overall revenue, but maybe you could just talk about the various growth drivers in that business that could help you continue to achieve that growth that you've been seeing.

Sean George -- Chief Executive Officer

Yes. And it is new and early. Albeit, it is significant enough, we felt it was important to break it out. I think the major – we can kind of start with what we're currently doing.

And again, first I'll just point out because I just feel obligated to do so. This data business that we're building is one – it's 100% patient owned and controlled so that the kind of view ourselves as the brokers or the ambassadors or the caretakers of that data, whatever – however you want to view it. Again, I just feel, it's always important to keep everybody square on the different approaches to the data business that some companies are taking. Ours is one where the patients don't control it.

To-date, the revenue is generated either by pharma partners, looking for patients with specific variants or natural histories that are important for trials or to put on therapy. So that's kind of a major chunk of that. There are also analytics offerings that we and soon others will be putting on top of that patient data network that I think it's mostly biopharma partners now, but we hope in the future other researchers, whether they be government or academic or whatnot, can pay for data analysis on a larger set of that patient data. Including in there as well are some of our other platform services.

Whether it be pipeline analysis, sequencing services, data decision tools, or others that other people or other players are using or licensing. In the future, we hope to continue to expand the offering. We've got a lot of ideas of different economic models that can work in an ecosystem of what will very likely we think end up being a competition based ecosystem around that patient network. But those are the major economic activities a day, which we would count on for the growth for this year and then years out we're optimistic about new and creative ways to continue to grow that business.

Matt Sykes -- Goldman Sachs -- Analyst

Got it. Thank you for that. And then just given them more measured levels of spending, how are you thinking about internal capital allocation? Like specifically what segments of the business you maybe seen increased level of spend and conversely, where you maybe normalizing spend a bit, I guess I just would like to get some additional color on sort of the reallocation resources that Ken spoke about.

Sean George -- Chief Executive Officer

Roxi can answer that one.

Roxi Wen -- Chief Financial Officer

Yes. Thank you for the question. So from an allocation – top allocation perspective, really for us, this is the balance of driving, achieving the 2022 and near-term growth and then continue to build the long-term growth, because we're here to change the – build the future of medical medicine. And we're not here just to deliver the quarter or the year.

But that balance is important to us. So we do have a – Sean and – Ken and Sean both mentioned the portfolio management approach we're taking in the near-term looking at in imperatives. So what it takes us to deliver the near-term, but long-term strategic planning, thinking about the long-term growth, how do we address the immense market opportunity we have, it's really the kind of the high level approach we take.

Matt Sykes -- Goldman Sachs -- Analyst

OK. Thank you.

Operator

Your next question comes from the line of Dan Brennan with Cowen. Your line is now open.

Dan Brennan -- Cowen and Company -- Analyst

Hey, guys. Sorry. Thanks for the follow up here. So I guess the question would be on the burn, the sector's been weak, your stock has been weaker kind of toward one of the weakest ones.

And the burn is one of the things we hear often in terms of the dead load in the burn. So I'm just wondering with the improvement in the burn. Could you break out at least for 2022 within the six, 650, what the underlying burn is versus what you're kind of assuming for M&A. And then related to that in terms of the improvement that we're seeing, would you help us think about the timeline at which you could get the cash flow break even?

Yes. No. Appreciate the question, Dan. So one, I would say the six, 650, the target is inclusive – all inclusive.

So that's all uses of cash in including M&A that's a call that the firm target as it were, let's see, in terms of the burn, as a question mark, it's interesting, I think you'll note other – anybody who wants to play in the future of medicine that is genomics driving healthcare is increasing their burn at this point in time. We're decreasing ours because admittedly, we've started high and we've been executing a unique strategy to capture what I think is a mass of opportunity. And with that, I think we've earned ourselves some choices here, right. We're at a point where again, pushing past 500 million, one billion going to two billion sooner than later in there is the obvious timing to then be able to run on our own cash flow if needed.

I think as we look out our current plan and you think about the ability to reduce burn thereafter combined with our balance sheet. We're actually very comfortable that we've got the capital we need, we won't be doing a kind of traditional raise in the open markets. And since you mentioned the debt, there is plenty of support and plenty of time to do something about that with more than enough time before '24 comes around. So I'd say kind of with our current plan and the growth opportunity in front of us, we're actually sit sitting pretty comfortably with our balance sheet and feel good about the next couple years.

On the time, the reason we don't put a time in the – again, given the opportunity in front of us, it's really a growth story. And so depending on the top line growth, we'll then translate to what time we flip over to operating cash flow positive. And again, we'll just meter the expenses between now and then I think that's the way we see, certainly by the time we get to $2 billion in top line revenue, we'll be there. And as a matter of how quickly you get to between now and then, it plays out.

Got it, Sean. Thank you. And then maybe one final one, just on M&A, just how I mean, it's obviously an important part of your strategy, your growth strategy and you've been quite active filling in areas of need, how material a deal in 2022, do you think in terms of the pipeline that you see in your needs, any sense on what we should be thinking about from an M&A plan in 2022 and how big you might look to go?

Sean George -- Chief Executive Officer

Yes. I mean, kind of the thing that has changed the most, considering market conditions is the M&A plan. So, whereas we might have considered a really interesting technology content capabilities that would increase our burn, that's off the table for now. We're kind of, like I said, we're serious about the guide top, middle and bottom.

We're going to stick to that. With that said, I think there's plenty of digital assets, technologies, pipelines, anything out there that can basically really quickly reduce our cost basis for the digitize the internal operations of the company, all of that is still very interesting. Some have asked recently about revenue or even kind of gross profit that you can, that we could purchase. Now that's something in the past we've never really done, but I think that's something that, I would just say given the time maybe that could be on the table, so that's another change I would say.

But I would kind of call those on the margin. We don't – those are I believe wise changes to make in the M&A approach given the market, given uncertainty in the next year or so. But like I said, it's all encompassed in the burn forecast.

Dan Brennan -- Cowen and Company -- Analyst

Great. Thanks, Sean.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Jack Finks -- Investor Relations

Sean George -- Chief Executive Officer

Roxi Wen -- Chief Financial Officer

Ken Knight -- Chief Operating Officer

Dan Brennan -- Cowen and Company -- Analyst

Chad Wiatrowski -- SVB Leerink -- Analyst

Unknown speaker -- William Blair -- Analyst

Yuko Oku -- Morgan Stanley -- Analyst

Casey Woodring -- J.P. Morgan -- Analyst

Matt Sykes -- Goldman Sachs -- Analyst

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