Company Overview
GeneDx Holdings Corp. (WGS) is a diagnostics company specializing in advanced exome and genome testing. , underpinned by a proprietary and rapidly expanding dataset of rare diseases. The company's testing services are presently focused within the pediatric outpatient and neonatal ICU settings. As realization grows of the importance of genomic testing in early diagnosis and intervention, the market opportunity for GeneDx has also been expanding. This is evidenced by a recent endorsement from the American Academy of Pediatrics [AAP] which has updated guidelines to now recommend exome and genome sequencing as first-tier tests for children with developmental delays, and the company's partnerships with states and the National Institutes of Health (NIH) to expand newborn genomic screening.
This third quarter earnings preview looks at the key metrics that investors are likely to focus on. For more background context, readers can refer to the June 2024 report, Mapping a Path to Leadership, and subsequent updates.
Earnings Preview
GeneDx will report its third-quarter results before the market opens on Tuesday, October 28, 2025.
Q3: 2025 (Sep) Estimate Q3: 2024 (Sep) Growth(Y/Y)
EPS $0.42 $0.04 950%
Revenues $104.7 million $76.9 million 36%
Source: Seeking Alpha, Benzinga, TipRanks, prudentbiotech.com
KEY METRICS
Volume Growth
A key metric that investors will be watching closely this quarter is the volume growth rate for the whole exome, genome (WEG) tests.
After the first-quarter results, a sequential decline in volume growth sparked a sharp selloff in the stock, raising concerns about a slowdown, which was discussed in an earlier report, Market Misreads Test Volume Dip. In the first quarter, test volume grew 24% year-over-year, and GeneDx maintained that its target of 30% full year growth will be achieved through faster growth in the second half based on expanding market penetration and new service offerings. The third quarter growth rate will be the first opportunity to confirm that the testing volume growth trends align with management guidance.
The scenario below illustrates the dynamic impact of the twin levers of volume and pricing embedded in the company's revenue model. It is not an estimate, but offers a potential template to better understand their impact on revenues.
The slide shows Q1 and Q2 actual volumes, and a Q3 scenario where testing volume grows by a 31% annual rate to 25,180 tests. If Q3 grows by that rate, then Q4 volume will have to grow by 36%, as can be derived, to achieve the guidance of 30% full year volume growth.
Pricing Growth
Another key metric is the pricing or reimbursement rate for each test. Pricing is impacted by the denial rate on claims filed with Medicaid and commercial payors. A sizable portion of the claim denials for GeneDx stem from administrative and procedural errors. Thus, as these denial rates decline, which has been the case for several quarters, the pricing rate improves. The company believes it has more runway for improvement in denial rates. Notably, most of the gain from price improvement falls to the gross margin line.
The scenario below assumes flat sequential pricing in Q3, an unlikely and conservative assumption, but instructive in understanding business leverage.
Revenue Growth
Under a scenario of 31% volume growth and zero pricing growth, revenues from the WEG segment will approximate $94 million. With revenue contributions from other segments, total revenues can reach $109 million, ahead of consensus of $104.7 million even with no pricing gains.
Pricing improvements likely continued in the third quarter, and even a modest gain in the above scenario analysis can boost revenues even higher. Of course, test volume growth is key, and whether it reaches 30% or higher is likely to set the post-earnings market sentiment.
Conclusion
GeneDx is operating in a highly favorable market environment, well-positioned at the intersection of a shift towards genomic testing. The company's business is benefiting from trends that are robust, timely, and relatively insulated from regulatory policy upheaval, which supports a bullish outlook.
As a result of its rapid growth and attractive market positioning, the company's stock trades at a premium valuation with a high price-earnings multiple. Thus, the company must deliver on expectations and offer a guidance raise, which has been a pattern for the past several quarters, to warrant its high multiple.
We expect GeneDx to deliver another strong earnings report, driven by test volume growth that maintains its 30% targeted growth, lower denial rates, rising gross margins, and revenue contributions from newer services. As a high-multiple stock, any perceived shortfalls could trigger outsized volatility.
GeneDx has been a position in our Prudent Healthcare and Prudent Small Cap model portfolios. Positions and opinions are subject to change without notice. Investors should conduct their due diligence, adequately size their positions based on their risk profile, and be mindful of the risks associated with small-cap growth stocks.
(The article was first published on Seeking Alpha)
