Q2 2020 CareDx Inc Earnings Call
Greetings welcome to cardiac incorporated second quarter 2020, <unk> earnings Conference call.
This time, all participants are no listen only mode. A question and answer session will follow the formal presentation.
Well sure well should require operator assistance or in the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Greg The Dot check they do you may begin.
Thank you. Good afternoon. Thank you for joining us today earlier today care Dx released financial results for the quarter ended June Thirtyth 2020.
The releases currently available on the company's website at Www Dot care Dx dotcom.
Peter <unk>, Chief Executive Officer, and Michael Bell, Chief Financial Officer will host this afternoons call.
Before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that are not statements of historical fact should be deemed to be forward looking statements.
All forward looking statements, including without limitation or examination of historical operating trends expectations regarding coverage decisions.
Pricing and enrollment matters, and our future financial expectations and results are based upon current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
Burleson descriptions of the risk and uncertainties associated with our business. Please see our financials or financing excuse me our filings with the Securities Exchange Commission.
The information provided in this conference call speaks only to the life broadcast today August 4th 2020.
Cardiac disclaims any intention or obligation, except as required by law to update or revise any information financial projections or other forward looking statements, whether because of new information future events or otherwise.
This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles.
Reconciliation to the most directly comparable GAAP financial measure maybe found in today's earnings release filed with the FCC I will now turn the call over to Peter.
Thanks, Greg and good afternoon, everyone I'm pleased to welcome you to carry axis call to review our results for the second quarter off to anybody back on April was call I'd again by talking about how we chose brands Glen Brown as our theme for 2020, and how proud I lot of our teams response to the coldest bye.
Today, I can say that our team has taken care dx to a whole new level the dedication to the resiliency of every member of Kodiak, It's truly inspiring I want to thank our employees and see you have made the lives of Transplantations end, there can give us better because of your grid you a hardware.
And your devotion, you exemplify, but essentially businesses and brokers and for thanks for leaning in.
Now turning to our exceptional results public water in the second quarter off 2020 be reported revenue of 41.8 billion, an increase of 33% compared with the second quarter of 2019.
Rose primarily came from our testing services revenue of 36.3 million, we provided over 17100, our short kidney and Arlo not hard patient result, an increase of 44% year over year.
Product revenue for the quarter was 3.3 million and digital revenue added 2.2 million to the topline. We believe that these are exceptional results in a challenging environment.
During this crisis, we have chosen to investment TGT in areas that will accelerate the building up our remote interest that care. We're leaning in these strategic areas include our direct to patient capabilities and our clinical activity, especially though its focus on our multi modality testing and digital itself.
Susan.
These investments will all accelerate our precision medicine offerings in transportation.
Our digital acquisitions have proven to be a tremendous acid as it has enabled us to pivot faster than anyone in the industry in building out our offering grants and Rob.
In the latter part of margins relative to second quarter. Several cities experienced rapid increases in newly confirmed cases of Koby 19.
These increases came more request from physicians and patients for remote track and pulled out of the bother me as a result, our remote Frac services has experienced continued growth.
For the quarter over 40% of our patients without originated from remote today or other mobile Phlebotomists services.
Under the tremendous leadership of Red Sito in just over four months remote Frac has gone from an idea spawn from conversations that clinicians to a full service offerings that now originates a significant proportion of our patient results remote Frac has provided patients peace of mind by giving them the ability to avoid fans.
Senders and physician offices, thus, reducing the risk of contracting Cobiz 19.
To date around 150, transcendence, our offering remotes actually that patient and over 4000, kidney heart and lung transplant patients have enrolled.
Our nationwide network of mobile Phlebotomists has grown to over 10000.
Not only have we had to change the way be calling on customers, but the pandemic has also changed the way, we communicate and present important clinical information to leaders in the field of transportation.
In late May at the virtual American brands, and then Congress annual meeting our program included virtual abstract sessions virtual symposia and prominent office delivering 10 abstract.
Cutting edge content on Aloe shore, Allomap, I box and kidney care buffer said.
Having 10 abstracts accepted for presentation at 80 C and having over 1000 clinicians patients and investors log onto our virtual obsession well its exceptional and quite an honor for our clinical team, which is that by Shanda luckier.
The large turnout for our virtual events demonstrates our leadership position investment here as we are at the forefront of innovation in this space.
All those might be talking TDX is doing.
At the field is recognizing our efforts and our dedication.
We're also using these new tools to communicate to clinicians and patients injury industry conferences and interactions with advanced then community. We are very encouraged by the positive feedback from Nephrologist cardiologist fast then coordinators and patient about our virtual advisory boards.
We have and will continue to virtually support our customers and to called on our physician advocate and grandstand Sandra administrators to every extent possible.
Well, we have successfully pivoted our testing services business with exceptional success. The also point out that our product business with its many launches has been negatively impacted by the coded pending.
Hospitals and transplant laboratories across the U.S. and Europe have restricted access to their facility for non for outside personnel.
In May we received CE Mark for other CTX 17, our best in class solution for HD matching.
Our friends that owners and recipients.
By providing better care for patients by extending the typing range to non classical Asia they lose side.
Traction of our launch efforts will be late in the U.S. and Europe due to the call it pending.
Our product revenue is not what we had hoped for we had the chance to welcome exceptional talent into this group.
With Paul Towers, we added strong commercial leadership from Thermo Fisher.
Paul has been leading the success of one lambda with Dr. terrorists hockey for over 25 years.
Turning to our operation.
We continue to adapt to a dynamic colgate environment in transplant centers hospital and even within our own facility. We have established internal operating solutions to protect our employees and their family by continuing our commitment to supporting patient despite cobi affecting many large cities across the U.S.
And I did see I'm pleased to report that we have continued our operations without interruption.
We are firmly committed to our vision and we never wavered from our commitment to prioritizing patient.
With respect to our ongoing clinical studies as one would expect we did see a slowdown enrollment in our growth during the second quarter. However, we experienced an increase in short and utilization of hard care as many centers have switched their biopsy protocols to noninvasive surveillance.
Our hard franchise has been exceptionally strong in the second quarter and the value proposition of our precision medicine solution has never been clear.
In the second quarter, we recorded our first ever Atlas sales revenue volume was only a small amount of revenue. It clearly demonstrates the next step in expanding our LNP technology from solid organs to cell therapy.
To pursue this we have built an exceptional team with strong business development hired as well as elevating internal talent.
While the art in the proof of concept phase, we have feel that many inquiries from pharmaceutical and biotech companies of all aside.
We are very excited about the opportunities in south therapy, and we will continue to update you on our progress.
Finally, turning to the balance sheet, the second quarter saw significantly strengthened our cash position, we close the quality of the 211 million of cash following a very successfully executed public offering in June Mike Bell and the team have done an exceptional job.
Field, we now have the rightsized balance sheet to continue to accelerate our revenue growth and take full advantage of opportunities available to us.
Before I turn the call over to Mike I would like to take this opportunity to thank our employees again, we are firing on all cylinders, we provide our services to more transplant patients every day I'm very confident the best is yet to come.
As you can tell I'm optimistic about the remainder of 20, Fannie and look forward to providing update on the progress in future communication.
Now I'll hand over to Mike to discuss our financial Mike. Thanks, Peter.
Turning first to the income statement total revenue for the second quarter was 41.8 million a year over year growth of 33%.
Growth in revenue was primarily driven by al show kidney and Allomap Hot we saw increased penetration primarily due to the success of pretty much right and the need for centers to build to monitor that patients promoting as a result testing services revenue in the second quarter increased 41% year over year to 36.3 million.
Our second quarter product revenue decreased to 3.3 million due to the kobin related issues outline daily by Pizza and our digital revenue was 2.2 million.
Moving to our gross margins.
For the second quarter of Twentytwenty, the gross margin was 64% compared to a gross margin of 63% in the same period of 2090.
The non-GAAP gross margin for the quarter of 68% compared to 67% in the prior quarter.
On a sequential basis. The non-GAAP gross margin was down approximately 300 basis points compared to the first quarter of Twentytwenty.
Primarily due to the increased number of tests originating from remote track or other mobile phone, but to me services.
As a reminder, the cost of a mobile for button, we draw can be between 101 hundred $50 more expensive than a lot draw.
Although the incremental costs of remote track a mobile blood draws a heads of state.
We're still confident on gross margins will continued to improve over time due to the operating leverage of our testing lab in Brisbane.
For the second quarter of Twentytwenty net loss was 6.6 million compared to a net loss of 7.8 million in the same period of 29 team.
Our net loss per share was 15 cents for the quarter compared to a net loss per share of 19 cents in the second quarter of 29 team.
Non-GAAP net income was 1.7 million in the second quarter of Twentytwenty compared to a non-GAAP net loss of Cerro point 1 million in the same period of 29 team.
Our non-GAAP net income per share in the second quarter of Twentytwenty was zero was four cents compared to a non-GAAP net loss per share of zero cents in the same period of 2019.
No that both GAAP and non-GAAP net income in the second quarter include other income of 4.8 million related to the Kazakh to provide a relief funding that we received in April.
As a reminder, we define adjusted EBITDA as non-GAAP net income before interest income tax depreciation amortization and other income and expense.
For the second quarter of Twentytwenty, we recorded a negative adjusted EBITDA of 2.8 million compared to a positive adjusted EBITDA was 0.1 million in the second quarter of 29 team.
Our adjusted EBITDA in the second quarter of Twentytwenty was impacted by the cost of remote truck immobile blood draws as well as increase spending in the R&D and Gionee lines.
For research and development, our clinical study expenses increased due to an uptick in activity in our show study as well as upfront costs related to the Euro map development agreement signed with called out in May.
Oh Gee in a cost increased sequentially in the second quarter, primarily because of the higher legal expenses related to our ongoing litigation efforts.
We also but traditional employee related expenses to reflect the remarkable performance of our employees. During this highly unusual quota.
Peter had mentioned that we're leaning in and seizing opportunities to build outs how mode. During this crisis. Therefore, we expect operating expenses to increase in the third and full corps fourth quarters. This year.
We will continue to develop our pipeline and continue to focus on top line growth. We will also expand our sales and marketing efforts beyond transplant centers by going direct to patient and to community Nephrologists.
In the second quarter, we significantly strengthened our cash position in April when the Cobiz crisis and uncertainty was at its peak, we utilized our aftermarket program to raise approximately 24 million.
We followed that in June with the successful public offering of approximately 4.5 million shares of common stock raising roughly 135 million.
As a result, cashing cash equivalents on June 30, Twentytwenty, what 211 million and as Peter outlined earlier this puts us in a position of strength to execute on opportunities to build up on our transport Translarna platform.
That's operating cash flow was 24.1 million in the second quarter of Twentytwenty.
This includes both the 4.8 million cars that provide a really funding we received in April.
Well as the 20.5 million, we received from CMS through its expanded accelerated on advanced payment program.
As a reminder.
We expect CMS to recoup the advance payment between August in November this year.
Turning to guidance.
Whilst we have seen many transplant centers retentive some level of normality over the last couple of months. There is still much uncertainty surrounding the ongoing impacts of covered 90, and our business and as such we will not currently but.
I'll be providing revenue guidance for the full year twentytwenty.
I'll now hand back over to Peter Thank you Mike in closing the second thought it was an exceptional quarter for care Dx with covert 19, limiting access to hospitals and transplant centers in the United States. Our team continue to roll out solutions like remote frac across the country to bring much needed. So they lens testing to transplant patients.
We believe we are experiencing the beginning of the tectonic shift in the way clinicians are monitoring the health of transplant patients and precision medicine overall.
The movement towards DNA and molecular testing from traditional biopsies is happening and we are well positioned for this shift but importantly, we are also the reason for it.
Thank you all for joining the call and I will open the call for questions.
[noise]. Thank you if he would like to ask a question. Please press star one on your telephone keypad and confirmation Tele indicate your line is in the question kill you made press star till if he would like three move your question from the Q and for participants music speaker equipment and may be necessary to pick up your hands it before presses.
Mr Tease out.
Our first question is from branded Juilliard with Jefferies. Please proceed.
Thanks, Good afternoon.
Peter just on room attract be curious to just get your prognostications or where you think that program can go the portion of volume do you think it contribute in the back half a year and if there were some upper level, where you think it'll just be a a remaining portion of the market. It just won't convert to pure mobile phlebotomy.
Model.
Speak to this program Kinda goes Mexico.
Thank you so much branded and greetings to Nashville, good to have you on the phone. So thank you very much will join him now remote track is embraced by patients. They love. It if it's an amazing service, where we have phlebotomists go into the home of the patient and make sure that they get the blood draw in the convenience environment on that they're used to and so they do.
Don't have to go to transplant centers and this has been by embraced by many patients across the country hundred 50 centers are using the service now now.
We have four to 4000 patients on the platform that number is growing everyday, but it's really depending on where transplant centers are and what their stances towards tele health.
Some centers have really jumped in and adopted Tele health solutions. Some other centers are actually moving now back as they re opening up to face to face visits and so it's hard to say that's one of the reasons why Mike said, it's hard to give guidance yet because there's a lot of variability across the country, but remote drag as.
Services here to stay we're all in we have invested into the platform and there are many many patient care managers now on clarity ex that our servicing this patient population. So there is significant growth drivers going forward.
I think you talked about a lots in the Alphacare out later this year, maybe by September my kind of mentioned some more direct to patient marketing programs are there's two tied together.
So we're talking about what that is how it helps you actually capture more volumes and I want to spend the marketing plan looks like around that initiative.
Oh, Yeah no. Thank you very much. This is in the broader context of Caredx managing the transplant patient journey and you hear us to feed which we will track. The reason why we were able to pivoting. So quickly was having our digital solution.
Income encompassing our surveillance testing modalities now you know with I don't care we are.
Prone to tackle one of the biggest issue in full strength, then care, which is compliance and adherence to a standardized protocol and we're all about standardization. So we can fill the individualized the offering with aloe care. We're now having a simple patient app that allows the patient to monitor their scheduled to be able to monitor their medications and maybe.
Even build a community for transplant patients. So we're very excited about this this is another touch point for care Dx with a patient that make sure that there is.
Then patient journey, so aloe sure I don't care is Alan launching in September and I'll be very excited about that launch.
Yes. Thank you.
Our next question is from Rachel that's now.
Paper Sam I. Please proceed.
Hi, this is rates on for Steve today, Congrats on the next quarter and thanks for taking my question.
So first half is no matter who will update.
Yeah. So first can you just give us an update on the transplant pipeline and impact on donation to the pandemic or I can start to see that pipeline return and geographic regions. It started to open back up.
You know I think overall transplant volume is roughly about 7% down year to date, so very very nice recovery, because we obviously living donations has been stop for a few weeks, but yes. We are looking around the country right now many transplant centers are back to normal or maybe even over compensated because transplant centers are really at the four.
Front of wanting to come come back and supporting now you know transplant volumes. This.
Is back up and we don't see I'm that these this will fill the down even so we see some cities might being in hot spots of covert because the oregons will be reallocated to other parts in the country. We have seen that in when there were issues in Detroit actually Cleveland versus what's taking over the organs and.
We have had a significant surged in transplantation and Cleveland Overcompensating the down go in Michigan and Detroit. So you know the system is very adaptable in so we think that for the next six months to come I think a transplant volumes will be back up.
Great that's awesome and so then on the grounds for studies, so Q any more clarity on the tightening and enrollment as return given those delays you start lead to cope and earlier this year.
Yeah, you know shore.
The comp the of the context of Allomap and Allosure is kind of standard of care now it's sold well penetrated I think here the excess defined for many years with Allomap post transplant surveillance that was noninvasive that now in this cobot era, we have seen at.
Tectonic shift away from biopsies really into non invasive procedures and so you know the short trial and the combination of Allomap and Allosure has really demonstrated the power of our platform moving away from biopsy driven protocols over to post transplant surveillance I.
I think you know with our crop being a more sophisticated study, where we have aloe sure plus aloe map kidney blast. The iboxx, scoring that is more driven by research coordinators and research event and so we have seen some research coordinator being furloughed. Some research activities actually put aside in these key.
Kidney transplant centers and so on kidney we have seen a small delays on the opera our crop recruitment, but actually that SVP of reopening up the country. The last week's has been very promising on our recruiting of our our Ochra study I will say as well is that you know.
We had a phenomenal and second quarter, even without opera being supportive. So so this really speaks testimony to the value proposition that we bring to transplant centers overall.
Great. Thank you those are all my questions.
Thank you Rachel.
Our next question is from Alex Nowak with Craig Hallum Capital Group. Please proceed.
Great Good afternoon, everyone.
In the centers that have moved from doing more alisher isn't allomap stirring the har other pandemic essentially going away from biopsy and regardless of if they're doing agreement tracker not has there been a durable benefit as these centers have reopened and try to go back to normal I guess said another way do you think this pandemic it off has accelerated your.
Penetration goals and to some of those transplant centers.
I would say from.
The proof is in the budding and we'll need to see that in a couple of quarters, but absolutely I think we have seen a true shift away from biopsy protocols into non invasive procedures I've talked to so many cardiologist that said, we always wanted to retire our biopsy protocol and maybe now is the time to do it now.
The reality might be that some of them are going back onto biopsy, we'll see that in the past, but if you see the feedback from patients that they don't have to spend more or less a day in it in a cath lab and go through an invasive procedures and now they are doing this for the blood test you wouldn't believe how many positive patient notes I receive and the entire team.
Feeds from patients that are saying, while this is so much more convenient and not being able to do that from home, even better but no I think there's a true shift in care, but yet to be seen right. I mean, you know this is one quarter and I think the hard franchise has been extremely extremely successful, but no I think this is something to stay.
That's great. This near enough of the 4000 remote frac patients. How many would you say are brand new to security acts and just on remote check and remote track in general. It can you say a compliance has actually improved compared to the traditional getting a blood draw in the clinic.
So I remember that being a core piece of the remote track features that compliance would increase.
And Alex you follow the story for a long period of time, So I don't wonder why in I'm not wondering why you are asking that question. We in hours. We ourselves are looking at these numbers very very carefully there have been a number of new patients come onto the remote track franchise and that's probably true that some patients have been pushed out for a for a few weeks or another quarter.
For their surveillance visits, but I think this is a brand new trend.
I think remote Frac has been Ics exception is successful in areas, where koby to hit extremely hard like New York or now we're seeing some up of rise in Florida and guess what remote Frac is just.
Accelerating but you know I think we'll need to give ourselves a couple of quarters to really did demonstrate how much is remote track there just today what.
Is the impact on surveillance and I think what do you are getting at what adherence.
With clarity ex now being much more aggressive and intimately involved in the scheduling of patients. We think that long term there will be a significant upside for us to manage these adherence rate, but again, we need to make sure that we demonstrate that yet and one quarter is not time enough. When these quarterly follow ups to related to.
I mean, if were successful in doing that I'll, maybe ask re read sito also to comment on on remote track and the patient adherence, we actually significantly invested into our patient care management Cool ranch.
Yes. Thanks.
My track seen a highly creditex peanut outstanding success and I think we've.
Good.
Thanks.
New patient.
As well as adherence has gone up Peter's mentioned this is obviously permit and a four months sort of experience, but those although street parameters that being said the.
Seen during the period agreement track among the 4000 plus patients that we've had.
Phil Hadley Robbins program.
All right I understand thanks for the.
And then just last question for me any update on heart care reimbursement where that sits with.
CMS and already entered Palmetto and then when would you expect to request kidney care reimbursement.
Excellent questions I'll give the kidney care. This is really too early yet for us to comment on Alex we'll probably see this communicating about our reimbursement timeline fund kidney care. Once we have clarity on hard care and now punt that question over to Mike Bell on hardware, yes on on hot.
I like I think no change from really the status last time, we spoke we're still expecting to that to go.
Sure.
The final coverage decision towards the back end of the year.
It's usually within 12 12 months from the public comment period, which.
Which was October of last year. So so we're expecting something around that time timing.
All right understood. Thank you everyone.
Now, let's keep the fingers crossed for us in the third quarter right. So thank you for doing that.
Our next question is from Andrew Cooper with Raymond James. Please proceed.
Hi, Thanks for the questions. Maybe just first I think Peter you mentioned that at least as potentially part of what went on in the quarter, but just do you have any sense for was there any amount of volume that.
I might have been.
Delayed from from one Q or sort of adjusted based on remote track, becoming available that we should think about as we think about pacing kind of through the remainder of the year.
Excellent question, Andrew and you know we finished obviously the second quarter very strong and we see that continue that trend continue into the third quarter.
I think on the heart franchise, we are looking at our numbers and saying this has been very very strong in the second quarter I will that momentum carry on throughout the rest of the year. So I think thats a good question.
On the kidney volume I think the the value proposition at the end of the D.. We were so low penetrated overall. So this is such a big opportunity.
That.
We are here to stay and built the franchise going forward. So in that sense. There's so much ample opportunity now we did comment on the side notice validus that we're building out our presence in community nephrology. So so there's going to be an ongoing expansion for care Dx a tremendous fields to grow going forward film.
In that sense.
We see continued growth going forward.
Thanks, and lease actually right into the next question I wanted to ask which was on that community nephrology effort is that when you think about that it should we think about this as.
You know building directs kind of one by one in and hospital settings or community settings or is there an opportunity to maybe partner with some of the larger players that are interacting with.
Yes, I'd patients in patients that presumably are coming on to transplant list.
What's the way, we should think about you're trying to address that.
No Ingenium bank is a much Andrew you've been following the company as well and we're all about the continuity of care the transplant patient journey, we're managing patients on the wait list, we are managing them throwing the transplantation procedure and then we are managing them also post transplant red sea to as actually masterminded, our our presence into the community.
Let's see setting which is a very natural progression about growing our franchise expanding from a transplant center now into the community nephrology setting. So it's a very very natural evolution over to you read.
Yes, Thanks, Peter I mean.
More than 150 centers quarter on quarter actively using offshore we've had deep penetration within incentives and now were three years on we had patients maybe can you do you to use rate and obviously you post Q1, so with that in mind, we've been able to develop and plan, which allows us to now structure.
Equally follow these patients and also bring new patients into the world a dollar show. So that's like that we haven't seen that same built up to like the allowance of that expansion.
As public process.
Great I'll stop there appreciate the question.
Our next question is from E Chen with H.C. Wainwright. Please proceed.
Thank you for taking my questions could you. Please comment on the Transcon volume second quarter, an early third quarter as compared to those in prior periods and do you think the Trust Trust one volume will continue to go up during the remainder of 2020, a remain at current levels for an extended period of time.
Hi, due to the new Carbonite NK cells in the country.
Excellent question I think this is really driven by two dynamics. One is living organ donation is back to previous levels and deceased owner to nation has actually never stop so it's in a way. Your question is about those living organ donation continues to increase and I would say yes.
I think there was a shell shock reaction in many transplant centers were included 19 that said overall backing off and now as they have learned how to deal with the crisis, we see actually a significant increase the.
You know the latest numbers on Oregon availability. These are actually significantly increasing due to cope with 19 because of cardiovascular death, and believe it or not because of overdosing. So there's a lot more patients. Unfortunately that our overdosing and they're more patients that are set its area at homes that are experiencing cardiovascular death.
Leads to an increase in Oregon availability with with the need increasing need of of organ transplantation. Because we have 100000 patients on the waiting list on kidney so in a way I see a significant increase which is also driven by a support of kidney health initiative from from.
Mm, which you might have read last year that we've kind of releasing I'm. The one year graft survival metric as the key quality metric for transplantation and releasing that metric really allows transplant centers to do take a little bit more risk when we had transcending in not only taking perfect kidneys, but also taking kidney.
Okay, and that will that will drive volumes and the last thing that I would say a huge and is that.
Many of these centers are also financial instant financially driven on institutions and transplantation is a profitable activity within within a hospital and as we read now many hospitals are looking for sources of income transplantation might be an easy area to be because you have relatively low case rates, but you know.
These are tend to be pretty profitable. So I I think all these things will lead to a significant increase in transplantations throughout the rest of the year.
Got it. Thanks. My next question is related to operating expenses, which have increased inc. second quarter.
Is that simply a result of being best Moneygram or track and other coping 19 regretted it solutions and do you expect that to remain and such levels as coking 19 continues to spread.
I like Mike to speak about our operating expense, but what we will see is that we're all then I think this one we've taken out some stops and really invested heavily especially in our direct to patient activities and we'll see what six.
I think you have you have seen us as a company being extremely responsible and extremely focused on building a long term sustainable business model.
But this was the quarter, where we said no. We will go in other companies might go another way, but we are we're going all then and so I'll turn over the the Mark to Mike, which can give you more detailed.
Yes, each and I think on the on the remote trackside most of the impact that we saw it should be was in the in the cost of goods line.
Okay.
The call earlier talks about a 300 basis point impact.
From remote truck on the gross margin and so we'll probably see those costs here to stay and we'll see them going forward.
On the Opex site.
You know the was cost related to remote track in that we've built out our patient care manager and direct to patient capabilities in some extent and as Peter mentioned you know that's good that's going to continue.
In future quarters, as we wanted to touch more and more patients. We also had increases on the on the Opex side on the R&D line.
Again, so some of this.
Kobe to related as we saw more expense related to to show and more uptake of of heart kicker.
But some of that some of those costs were non related to to covert we had this upfront to Cornell.
So that's for developed in the pipeline and that was for Europe I went out on the GA line. We also had some increase in the in our legal expense line, but yeah. I mean overall as Peter mentioned I think going forward, we see a bit of a change in the business model.
And that will drive some additional expense, but again it so focused on topline growth.
Thank you.
Thank you Jim.
Yeah reach the end of our question and answer session I would like to turn the call back over to Peter for closing comments.
Well. Thank you very much for your interest in care Dx, we'll continue to keep you updated as we are going into the second half of 2020 and looking forward to keep in touch with you. Thank you. So much bye bye now.
Thank you. This concludes today's conference you may disconnect. Your lines at this time and have a pleasant evening.