Veracyte (VCYT) Q1 2025: Decipher Volumes Jump 37% as Metastatic Launch Expands Prostate Franchise
Veracyte’s Decipher prostate test delivered breakout 37% volume growth in Q1, driven by broad-based physician adoption and the early metastatic launch. Margin expansion and a robust product pipeline signal disciplined execution, but the Marseille exit and tariff headwinds remain watchpoints. Near-term focus is on sustaining Decipher momentum and preparing for a multi-year wave of new product launches.
Summary
- Decipher Franchise Acceleration: Prostate test volumes surged as the metastatic launch broadens addressable market.
- Margin Expansion Outpaces Expectations: Lab efficiency and automation drove material gross margin improvement.
- Pipeline Execution in Focus: Multiple launches and MRD platform expansion set the stage for diversified growth.
Performance Analysis
Veracyte’s first quarter saw top-line momentum anchored by Decipher, prostate cancer genomic test, which posted 37% year-over-year volume growth and 33% revenue growth, reflecting both broad ordering physician expansion and increased per-physician utilization. Affirma, thyroid nodule test, delivered 10% volume growth and 6% revenue growth, with strength in account utilization but some drag from prior period collection dynamics and a lab benefit manager policy issue that is now largely resolved. Testing revenue, the company’s core business at over 90% of total, grew 19%, while product and biopharma revenues were modest contributors and are expected to decline as the Marseille facility winds down.
Gross margin expanded meaningfully, with non-GAAP gross margin up 400 basis points year-over-year to 72%, supported by automation, lab optimization, and cost reduction initiatives. Adjusted EBITDA margin reached 21.6%, exceeding expectations and enabling a guidance raise for the year. Operating expenses rose 14% as R&D ramped for pipeline launches and G&A scaled to support testing growth, but the company controlled SG&A leverage. Cash and short-term investments ended at $287 million, providing ample runway for product launches and operational investments.
- Decipher Penetration Expands: Ordering physician base grew over 20%, with both new and reactivated accounts fueling share gains.
- Affirma Durability Demonstrated: Volume growth and account utilization trends remain solid despite temporary collection headwinds.
- Lab Efficiency Drives Margin: Automation and sequencing upgrades offset inflation, tariffs, and supply chain pressures.
Although Marseille’s exit will reduce product and biopharma revenue, management expects the impact to be offset by U.S. launches and ongoing core testing strength.
Executive Commentary
"With meaningfully differentiated performance and an incredible body of clinical evidence, Decipher is already in a field of its own. At the recent AUA annual meeting in April, there were no less than 18 new abstracts presented across both Decipher prostate and bladder, including new data from the use of Decipher in clinical trials, as well as insights derived from the research-use-only grid platform."
Mark Stapley, Chief Executive Officer
"Non-GAAP gross margin was 72%, up approximately 400 basis points compared to the prior year period. Testing gross margin was 74%, up approximately 200 basis points, given timing of material spend as well as the benefit of automation and lab efficiency programs that we launched late last year."
Rebecca Chambers, Chief Financial Officer
Strategic Positioning
1. Decipher Franchise: Full-Spectrum Prostate Penetration
Decipher’s expansion into metastatic prostate cancer marks a pivotal broadening of its addressable market, now covering the entire spectrum from biopsy to metastatic disease. The launch, supported by robust clinical evidence and guideline inclusion, unlocks an incremental 30,000 U.S. patients annually and has already driven record ordering physician growth. The company’s focus on evidence generation and real-world data continues to differentiate Decipher in a competitive landscape.
2. Pipeline and Platform Leverage
Veracyte’s diagnostics platform strategy underpins a multi-year pipeline of launches, including MRD (minimal residual disease) for muscle-invasive bladder cancer, ProSigna LDT, and Percepta Nasal Swab for lung cancer risk. The MRD platform, built on whole genome sequencing, aims to deliver earlier recurrence detection and expand indication coverage annually starting in 2027. The company’s digital pathology and AI initiatives further enhance its evidence-generating capabilities and future product differentiation.
3. Operational Discipline and Cost Containment
Lab automation, sequencing technology upgrades, and supply chain management have enabled Veracyte to mitigate inflation, reagent price hikes, and tariff risk. The transition of Affirma to the v2 transcriptome platform exemplifies the company’s proactive stance on cost of goods sold (COGS) control. The Marseille facility exit, while a near-term drag on product revenue, is expected to improve profitability and sharpen operational focus on higher-growth segments.
4. Commercial Channel and Launch Readiness
Management is scaling commercial capabilities in a measured, ROI-driven manner, adding sales force and support only as justified by opportunity size. The company’s urology channel strength is leveraged for Decipher and MRD, while the forthcoming ProSigna launch will require building out a medical oncology channel over time. Leadership emphasizes disciplined investment tied to revenue ramp and organizational readiness for multiple upcoming launches.
Key Considerations
Veracyte’s Q1 validates its core testing growth engine while setting the stage for a new wave of pipeline-driven expansion. Strategic context this quarter centers on franchise durability, operational leverage, and the transition from European to U.S.-led product development.
Key Considerations:
- Metastatic Decipher Launch: Early uptake and physician enthusiasm suggest strong incremental growth potential for the core franchise.
- Margin Resilience: Gross margin expansion reflects not just volume leverage but successful execution of lab modernization and cost reduction roadmaps.
- Pipeline Execution Risk: Multiple launches (MRD, ProSigna, Percepta) over the next 18 months will test the organization’s ability to scale commercial and operational capacity without diluting profitability.
- Marseille Exit Impact: Product and biopharma revenue will decline post-exit, but management expects U.S. launches to more than offset lost contribution; timing risk remains.
- Tariff and Supply Chain Exposure: Tariff surcharges and reagent price volatility are being actively managed, but remain a source of margin unpredictability.
Risks
Key risks include pipeline execution—especially the commercial ramp of MRD and ProSigna in established markets—and the ability to sustain margin gains amid inflation and tariff headwinds. The Marseille exit, while strategically sound, introduces transitional revenue and cost uncertainty. Reimbursement timelines and competitive responses in breast and MRD markets could also weigh on future growth trajectories.
Forward Outlook
For Q2 2025, Veracyte guided to:
- Sequential step-up in testing revenue
- Modest sequential step-down in gross margin due to lower fixed cost absorption at Marseille and consumables timing
- Product revenue of approximately $2.5 million and biopharma/other revenue of $1.5 million, both expected to decline after Marseille exit
For full-year 2025, management reiterated:
- Testing revenue guidance of $470 million to $480 million
- Raised adjusted EBITDA margin guidance to 22.5% (from 21.6%)
Management highlighted sustained Decipher momentum, a robust launch slate, and ongoing cost discipline as drivers for the year, while flagging potential tariff and supply chain risks as ongoing watchpoints.
- Decipher metastatic launch expected to contribute incrementally in H2
- MRD, ProSigna, and Percepta launches to drive multi-year growth starting 2026
Takeaways
Veracyte’s Q1 demonstrates franchise durability and margin leverage, with Decipher’s expansion and pipeline launches positioning the company for diversified growth.
- Decipher’s 37% volume growth and metastatic launch validate the franchise’s competitive moat and expansion potential, with broad-based physician adoption and guideline support fueling share gains.
- Operational discipline and lab modernization have enabled margin expansion, providing flexibility to invest in pipeline launches and absorb near-term Marseille exit headwinds.
- Investors should monitor pipeline execution, particularly MRD and ProSigna launches, as well as tariff and supply chain impacts on margin sustainability through 2025 and beyond.
Conclusion
Veracyte delivered a high-quality quarter, balancing robust core growth with margin expansion and disciplined pipeline investment. The Decipher franchise’s momentum and the company’s readiness for multiple new launches underpin a compelling, if execution-dependent, growth narrative for the coming years.
Industry Read-Through
Veracyte’s Q1 results highlight the commercial power of evidence-driven, guideline-supported genomic testing in oncology, as well as the growing importance of whole genome sequencing and digital pathology for future product differentiation. The Decipher franchise’s rapid share gains and successful expansion into metastatic disease provide a playbook for late entrants leveraging clinical evidence and commercial execution. The company’s proactive approach to margin management—through automation, sequencing upgrades, and tariff mitigation—offers lessons for peers facing similar inflation and supply chain pressures. The transition away from European manufacturing toward U.S.-centric development signals a broader industry trend toward operational focus and margin optimization in the face of global regulatory and reimbursement complexities.