Building a genomics platform isn't easy. To gain insights into mysteries of biology, any "-omics" platform needs volumes of data that would have been impossible to obtain, let alone process, just a decade ago. But gaining access to the right biobank can make all the difference and significantly reduce the time to market.

Personalis (PSNL -6.94%) is a great example. The young company has intelligently navigated data obstacles by securing a series of contracts with the U.S. Department of Veterans Affairs (VA) to provide genomics tools for the Million Veteran Program (MVP). 

On the one hand, the relationship has provided a massive data set for building the company's ambitious NeXT Platform. On the other hand, Personalis leaned on the VA for 76% of its first-half 2020 revenue. Can the launch of a new liquid-biopsy product finally diversify revenue and deliver growth for the small-cap stock?

A question mark drawn on a card sitting on a wooden surface.

Image source: Getty Images.

What's NeXT for Personalis?

Personalis hasn't received the same attention as Guardant Health or Adaptive Biotechnologies among investors. That makes sense considering it doesn't have the first liquid biopsy test approved by the Food and Drug Administration (as does Guardant Health) or count Microsoft as a major investor (as does Adaptive Biotechnologies). But investors have recently begun to rally around the underdog story.

Personalis is developing the NeXT Platform for providing the most comprehensive view of cancer possible. Whereas other technology platforms have narrowed their focus to 50 to 500 genes (and, in turn, narrowed their time to market), Personalis has taken a more ambitious approach by attempting to track changes in all 20,000 human genes with a single test. 

The audacious technical bet was made possible thanks to securing the VA MVP contract, for which Personalis provides whole genome sequencing (WGS) services. WGS provides rare insight into the rate of mutations within the genome and adaptations in the immune response, which can be valuable in guiding treatment decisions in cancers. For instance, doctors could correlate specific mutations to the odds a patient will respond to a specific drug.

Is an inflection point near?

Investors are about to get their first real glimpse of the NeXT Platform in action. Personalis launched the NeXT liquid biopsy in early August, which is intended to be paired with the ImmunoID NeXT tissue biopsy. The company believes the combination will validate its ambitious approach to cancer genomics, although investors might just be hoping it diversifies revenue away from the VA MVP contract.


First Half 2020

First Half 2019

Change YoY

VA MVP share of total revenue





$38.6 million

$29.9 million


Operating expenses

$57.8 million

$39.4 million


Operating profit (loss)

($19.1 million)

($9.5 million)


Operating cash flow

($24.0 million)

($10.8 million)


Data source: SEC filing. YoY = Year over Year.

Investors have to acknowledge that it might take some time to see a significant change in revenue or customer count. The NeXT liquid biopsy and ImmunID NeXT tissue biopsy are intended to be used by biopharmaceutical companies during clinical trials involving advanced solid tumors. But the value potential is intriguing. 

Rather than conduct translational research in pre-clinical animal models, drug developers could use the NeXT Platform to tease out relationships between immune responses and tumor mutations in real humans in controlled settings. The findings could then be incorporated into future drug discovery studies and clinical trials. 

That suggests there will be a little lag built into the product portfolio, although the company saw a surge of orders ahead of its August launch. During the second quarter of 2020, Personalis says 32 customers have now placed orders for NeXT products, including six that placed their first-ever orders during the most recent quarter. It also completed its 75,000th whole genome sequence under the VA MVP contract, reinforcing the value of the relationship.

If customers keep trickling in, then this could get interesting

Personalis ended June with $105 million in cash and conducted a public offering of common stock in mid-August that could have raised gross proceeds of up to $143.5 million. Therefore, investors cannot doubt that the business is well positioned for the launch of the NeXT liquid biopsy product. Of course, investors would feel a little better about the trajectory of the business if the recent surge in customer count for the NeXT Platform was repeated in subsequent quarters, but they'll have to wait for that to be validated when third-quarter 2020 earnings are released in November.