Q3 2020 CareDx Inc Earnings Call
[noise] greetings and welcome to the care the X. third quarter 2020 earnings conference call. At this time, all participants are in listen only mode a question and.
<unk> session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
This conference is being recorded I would like to turn the conference over to your host.
Mr., Greg I'll check.
I think its director. Please go ahead Sir.
Thank you good afternoon, and thank you for joining us today.
Here today care Dx released financial results for the quarter ending September Thirtyth 2020. The release is currently available on the company's website at Www Dot purity X. Dot com.
Peter Maag, Chief Executive Officer, Rich, Chito, President and Chief business 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, our examination of historical operating trends expectations regarding coverage decisions right, you're going to roll that matters and other or our future financial expectations that results are based upon current estimates and various assumptions. These statements involve material risks.
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.
For a list and descriptions of the risks and uncertainties associated with our business. Please see our filings with the Securities and Exchange Commission.
The information provided in this conference call speaks only to the live broadcast today October 29 2020.
Rdx 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 excited to talk to you today about our outstanding third quarter results and the great work. Our company is doing to improve the lives of transplant patients and caregivers before I get to our quarterly results I would like to thank every member of the care Dx team. Once again, we have asked a lot.
Not from our team during these trying times and they continue to bring their a game their tireless work and dedication to Transplantations, it's driving our company to record financial results in the third quarter off 2020, we reported revenue of 53.4 million an increase of 58.
58% compared with the third quarter of 2019 once again, our year over year growth primarily came from our testing services with revenue of 45.5 million product.
Product revenue for the quarter was 5.4 million and digital and other revenue added to 2.5 million to the top line.
We have shown that because of our strategy to lean in and to expand our teams here Dx has never been stronger.
And it is a pleasure to have seen rents grow into the CEO position in this long planned transition, which we announced earlier today.
You have seen us executing a successful business strategy to become a leader in precision medicine, combining patient impact incredible growth and building a valuable profitable company. The same has been true for our people strategy Registrar and the organization in 2018 and has worked closely with me.
The board of directors and the management team to set the company strategic direction regimen has also led the commercial clinical manufacturing and research and development organizations over the past two years, which has significantly and positively impacted the companys performance readiness.
Rich has also been instrumental in Cuti axis evolution and has successfully executed multiple major initiatives, most notably the acceleration of the penetration of our shore.
In my new active role of executive Chairman I'm looking forward to working together with rich in the years to come to continue to build security exit into an incredible power house in transplant care and beyond.
As we accelerate the growth from our existing platform over to you rich.
Good afternoon, everyone. Firstly I want to thank Peter for his dedication and leadership in building Kt XR its IPO to where it is today. It truly is a special place things help shape and Bill Secondly, I'm deeply honored that the board has placed their faith and trust in me to lead Kt extreme this next chapter of growth and evolution and thirdly, I'm extremely fortunate we pay to staying on that.
As executive chair they'll be able to continue this journey together in a seamless fashion as many of you know he's been a mentor of mine to more than 20 years.
With that said this is such an exciting growth phase the capex.
Being very successful now response to kind of a 19, we provided over 21800, Alisch, all kidney and Allomap Hot patient results in the third quarter, an increase of 65% year over year.
Well the numbers kind of cases began to accelerate here in the U.S.. We made a strategic decision to go on the offensive and investing in areas that will drive growth and create near and long term shareholder value.
As we mentioned during our second quarter call, we look to allocate our capital wisely to position our company for robust growth and somebody's investment already bearing fruit.
The first of these investment areas is our direct to patient capabilities.
For the past several months, we have built out to me nephrology outreach team as a reminder, convenient for all just provide care to transplant patients once say safely discharged from the transplant centers sufficient.
Through our newly formed group will encourage patients and they can give as to continue to utilize our show nice the health of their transfer it.
Also as part about outreach program, we recently launched our elder care Bible App.
This patient centric resource with decide to help transform patients better manage their medication adherence quote <unk> al Shamal scheduling the patient care matches and measure health metrics.
We believe this comprehensive I will bring simplicity to the complex care regimen or maintaining long term health post transplant.
Another area of investment. It continues now not also bought me offering is what we call re my track.
Mmm track office transplant patients ability to have their blood draw and without the need to lead the hubs.
To date, approximately 150, transbay incentives are offering remote track to their patients.
The 5000, kidney heart and lung transplant patients have enrolled.
For the third quarter test originating from mobile Salami made up between 30 to 40 upset about test results as expected. This rate was lower than the 40% plus level, we experienced in the second quarter as clinicians and patients are more aware of how to reduce the risk of acquiring or trends may try to bars.
That being said, we believe free my track is a valuable service offering a transplant patients they can't give it.
The third area about strategic investments is a continuous development and communication of new clinical data and to support a peer reviewed publications.
The only this month, we announced the publication of positive clinical data <unk> El show alone from the Multicenter Laga study.
The study demonstrated that El show alone could identify patients with acute seller rejection, a critical need for lung transplant patients is only other option to detect rejection is invasive bronchoscopy we'd.
We'd love to try to find patients having the lowest survival rate of any solid organ transplant, we believe having a noninvasive downs to like El show can be a game changer for improving the lives of lung transplant patients.
Mid to adults here to molding Oh, this summer, which you recently updated with the newly published like our data.
Regarding the communication of clinical data in a virtual well, we think it's essential to develop innovative approaches to provide continuing education opportunities to the transplant community.
We're achieving this by attending virtual industry conferences, using new tools to communicate with clinicians and patients.
Hosting virtual Callow Vince in early September at the virtual International Congress or the transplantation Society. We hosted four interest she symposia showcase six places and sponsored the plenary session.
Not terrestrial laurels, we continued our industry presence by conducting a token LLC she explained and presenting nine posted on Capex offerings at the American Society, Histocompatibility and Immunogenetics Conference.
Last but certainly not least though 10 publications pinned down about cardiac solutions in the third quarter, including two other subjects, our recently announced pivotal Alice show lung data.
Regarding our ongoing clinical studies, we saw an acceleration in L. of course study enrollment during the third quarter compared to the second quarter.
Barring a significant increase in hospitalizations should it come to 19 in fourth quarter, we expect okra to remain at the pace. We experienced in this past quarter crush all study the utilization of hockey continued the right. We saw in the second quarter as many transplant patients switch they biopsy protocols to Alice show.
Well, we reported 28% year over year growth on our products business for the third quarter. This business is still negatively impacted by the coated pandemic.
Because hospitals are trying to set the bar trees across the U.S. and your continued restrict access to their facilities. There's some nonessential personnel. It has been difficult for us to gain much traction for our best in class products solutions side.
Finally.
We're very excited this month received final Medicaid coverage for our show Hot after a rigorous technical assessment by Moldx X program. It determined a noninvasive El show Hot surveillance testing protocol is a valuable solutions for managing transplant patient care.
This decision also paves the way for hot care, the culmination of El show Hot and Allomap hot to be made available to providers and patients.
We expect any reimbursement news from old X before the local coverage becomes effective in mid November now I'll hand over to Mike discussed all financials Mike.
Thank you rich.
Turning first to the income statement total revenue for the third quarter was 53.4 million a year over year growth of 58%.
Loan growth was driven by other show kidney and out of my part we saw accelerated penetration as well. So as a result testing services revenue in the third quarter increased 61% year over year to 45.5 million.
Third quarter product revenue increased to 5.4 million and our digital and other revenue was 2.5 million moving.
Moving to our gross margins.
For the third quarter of Twentytwenty. The gross margin was 68% compared to a gross margin of 66% in the same period of 2019 the.
The non-GAAP gross margin for the quarter was 71% compared to 69% in the third quarter to try to 90.
On a sequential basis, the non-GAAP gross margin recovered by approximately 300 basis points compared to the second quarter Twentytwenty, primarily due to the significant increase in lab testing volume supplemented by the slight decrease in the proportion of test originating from remote right under the mobile School bus me services.
For the third quarter of 2020 net loss was 2.8 million compared to a net loss of 1.8 million in the same period of 2090.
Our net loss per share.
Since for the quarter compared to a net loss per show four cents in the third quarter of 2019.
Non-GAAP net income was 5.1 million in the third quarter Twentytwenty compared to non-GAAP net income of 0.9 million in the same period of 2090.
Our non-GAAP net income per share in the third quarter was 2020 was 10 cents compared to a non-GAAP net income per share two cents in the same period of 2090.
As a reminder, we define adjusted EBITDA non-GAAP net income before interest income tax depreciation amortization and other income and expense.
The first quarter of Twentytwenty, we recorded positive adjusted EBITDA of 5.6 million, which is an adjusted EBITDA margin of 10% compared to adjusted EBITDA of 0.8 million on a margin of 2% in the third quarter of two actually 19.
That's operating cash flow was positive 5.2 million in the third quarter Twentytwenty and we closed the third quarter with 214 million cash.
As a reminder, in April we see 20.5 million from CMS Teresa advance payment program.
Based on recent CMS announcements, we now expect CMS to begin to recoup this prepayment in April Twentytwenty well.
We are extremely pleased that in the third quarter, we were able to get our gross margins back on track after the impacts of Repositrak in the second quarter and that we were able to deliver such strong adjusted EBITDA margin I'm positive operating cash flow. Despite the continued investments that we've made across the operating expense line.
As rich mentioned, we have strategically invested in our future and have been on the offensive to drive growth and ultimately shareholder value.
We will continue to allocate capital with a focus on top line growth by developing our pipeline and expanding our sales and marketing efforts beyond transplant centers by going direct to patients and community Nephrologist.
Turning to guidance, while we have seen many trust my sense is we tend to some level of normality over the last couple of months that.
There is still much uncertainty surrounding the ongoing impacts of koby 19 on our business and as such we will not currently be providing revenue guidance for the full year 2020.
I'll now hand back over to Peter to close out.
Thank you Mike in closing the third quarter was another record quarter for cardiac despite COVID-19 affecting all aspects of our employees' lives, we continue to develop and deliver new and unique solutions to improve the lives of transplant patients and their caregivers over the past several months our company has shifted into a higher gear and we will continue to keep our.
Good on the accelerator cure DXP has built a platform in transplantation, which may shape. The future of this exciting therapeutic area in many ways. As an example, I would like to invite the investor community to a virtual meeting innovation and transplantation on Thursday November 5th on one to 230 P. M.
Easter.
Finally, I would like to congratulate rich on his appointment to CEO and I look forward to working closely with them as well as the rest of the organization to continue to build kodiak into a powerhouse interest on care. Thank you all for joining and we will now open the call for questions.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone would indicate that your line is in the question queue. In your press star two if you'd like to remove your question from which you for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star kids.
Well the police while we pull for questions.
The first question is from Brandon call. Your Jefferies. Please go ahead Sir.
Hey, Thanks, good afternoon.
Oh good afternoon Brandon.
Peter clearly you've you've been at this a long time in the in the CEO position just curious to get elaborate just why now is the right time for this transition.
Right. It would be curious to know if you have any.
You potential changes in strategy or approach, perhaps around the M&A that you might like to pursue.
And you.
You know Peter do you think you'll pursue other opportunities.
Outside of care Dx near term.
No Brandon. Thank you so much for the question you know I was joking a little bit, but the team I'm moving now from overtime to full time.
I'm on this decision.
We continue to focus on on Qt X. I'll be working with rich on the next phase for the company, which I think is incredibly exciting.
Yeah. Thanks for it I mean, Peter if I work very closely over the last few years on the strategy and the growth of the organization and I've managed across all the business lines I don't expect it to be anything from changes in the in the strategy in terms of the corporate development I've also been involved in all the different activities, we doing over the last two years. So.
Again, that's not part of the normal operating cost of what we've developed.
Thanks, and then a question Fredrik or Peter you hired a significant amount of additional patient care managers in the period.
Curious just if you could perhaps quantify the initial impact from those new hires and really how you think about potential utilization of these reps are productivity either by tests or no surveillance or centers Ms.
As they.
Continued to mature I guess over the next few quarters.
Yeah. Thanks, I mean that we see the P. Sand is truly is a strategic.
Asset, which has played a key role to be doing you know kind of it. Our response would be my track I think you know some of the key things to note is that went out patient care manges, Oh actually schedule. The patients it's actually a much higher <unk> inherent samina centers do it themselves.
I think at the same time, we're seeing benefit from having a direct relationship with the patient needs. We now need to offerings such as our l.. Okay. So really has been a real strategic asset for the organization I think we're seeing the benefits of that as well.
It should be noted that we have more than 5000 patients found me my traps. That's also been part of the reason why we've expanded a bit with the Peight pcms.
Okay, then maybe one for you Michael or any color you maybe share with as far as just kind of the investment plan or capex outlook, if only just for the fourth quarter be helpful. Thanks.
Yeah Brendan.
Threats, rather yeah, and I mentioned it up on the scripted remarks, we've continued to invest really on and on the research and development pipeline and also the sales and marketing.
I would say for <unk> for Q4, I mean, you should expect us to continue that investment and continue the increase that you know what x. I would expect sequentially, our operating expense to to increase again in Q4 as it did in as it did in Q3.
Forget thank you.
The next question is from Steven My papers Sandler. Please go ahead Sir.
Oh, great Yeah, good afternoon, everyone.
Stephen Good to have you all right.
Yeah, Yeah, congratulations Peter Yeah, it's been a it's been a great Ron congratulations for all you've done to build caredx to where it is now and yeah. I believe it's in good hands with was French.
And Oh, well deserved transition for you to take.
<unk> to go from overtime to what did just working full time, so so a well deserved.
Thank you very much Steven and you've been following the story for a long time and you know there is so much opportunity yet as we're executing on those 2 billion dollar two and a half billion dollar Tam in kidney and we're just in the beginning with heart and lung, but so many growth drivers on the company I'm. So I'm still excited of handing over to Rick.
<unk>.
Yeah, Yeah, no. It seems it seems like a good it seems like a good timing and.
Yeah, I think it's I think it's great Oh, so yeah. So maybe just moving on to questions I I know you've got the dark hair.
Decision or do you have any indication on the heart care pricing.
Hi, it's Steven its Mike here, no not yet I think we mentioned again.
During the call that we're expecting to get the.
The reimbursement news, although the pricing by the Mitch Middle of November which is when a when this would go effective but yes as yet we have no. We've got no addition information.
Okay, Great and then on kidney care could you remind us again on the timelines on when you're going to submit for for Medicare reimbursement.
On on kidney care for I. reinvestment, we still continue on with kidney care as part of Oprah. So it's part of the ongoing clinical studies that we're doing at this stage.
Okay got you, Okay and then.
Finally on a remote track you know I know, it's hard to predict what the steady state level is as a percentage of volume will be.
And I know transfer instead of just <unk> have reopened but.
But could you give us a sense of what you think the steady state level will be going forward maybe in in in maybe in like a 2022 sort of like a post a post pandemic runrate.
Yeah, I think for us steady state type scratchy, we expect to be around that 40% Mark I think it's something that we've seen it's a fairly you know relatively consistent number and also with with coated you know with this and said he said that would certainly lead to more remote track usage as well.
Okay, Gotcha and the [noise].
And can you give us a sense on how patient adherence has improved with the remote track. Given you know continued COVID-19 pandemic issues can you just give us a sense of some some color.
[noise] Yeah, what we've seen is we schedule patients with non remain on track and we've been tracking there has been actually and increase in here and with the usage every metric and.
More importantly, when we actually schedule a patients.
Outpatient care managers and if anything increase this is what the centerstate himself.
Patients more importantly, they actually really like the offering and I think that's one thing that's been a bit of a pool for them to actually do more of it and that's one of the drivers the ability to see during this time to have a blood draw time is really being thing thats really compelling I mean more than not in 10 patients really.
And the feedback from shared that this is like they want to continue doing moving forward.
Yeah and then.
Since I'm getting as well yeah, yeah, yeah meals that it makes sense you don't compromise show sorry, yeah.
Honestly they also with the launch of dollar care I think this enables the additional pointed direct patient contact as well I think it's it's a nice pace continuing we had obviously outpacing images, calling out these patients to try and spend said also calling them when they leave the trying to spend Saturday. We also have now you know way of connecting patients through Alphacare and scale out digital patient.
That said, it's all part of the plan to continue this sort.
Sort of interaction with the patient.
Yep Yep, Yeah that makes a lot of sense and maybe I can squeeze one last one a one more in for for Mike given remote track you know, it's going to be a significant part of the volumes going forward I know the margins are impacted with the with the full bother me.
Can you give us a sense of how you can get to your stated goal of 75% long term gross margins. Thank you.
Yeah, Stephen and you know.
Obviously this quarter was it you know we we recovered really nicely on the on our gross margins back to where they were in the in the first quarter. So we sort of.
Got over that remote track already and that increase improvement in in Q3 was was down to the volume coming into into the lab and I think as we look as we look going out.
Is the volume continues to increase that's going to naturally drive.
Improvement in the margins, but also we've got a lot of efficiency and optimization projects coming on in the in the lab at the moment, so that they'll drive that and then of course on the topline and we've mentioned this before.
As we get additional reimbursement and whether that's for other show halt all we get private payer reimbursement start coming through for Alisha and kidney.
As we drive the increase in average reimbursement, that's also going to drop down to the to the gross margin improvement. So I think that say feeling really comfortable that we can get to 75% gross margins.
We have a question from Alex Nowak, Craig Hallum Capital Group. Please go ahead Sir.
Great. Good afternoon, everyone and congrats Peter and Reggiani transitions here, you've put up some really impressive growth during a tough quarter and we touched on it a bit during the call. You mentioned now this was a culmination of all your investments you every much track more patient care managers out there the focus on protocols.
You also have to just the general push to go to liquid biopsy, but I was hoping you could kind of signal out for one of US is what is the most beneficial investment that you saw during Q3 generating the highest ROI than a quarter and how do you think about that benefit continuing into Q4 and beyond.
[noise], Yeah, I think the most banks investment we made is you know that the.
The pacing capex as we continue our TTP strategy I think it's really important for us.
As we build that connectivity not only within the patient in France that sentiment moving out in back into community is that sort of last mile and.
What we've seen is typically doing quite a bit there response to cope with the response and re my track as being amazing and to the right. The often they like I think now we're adding additional things as part of that suite, taking team that relationship that's building that relationship with the.
Patient and clearly that will start with.
The patient came and is way off its premium wine club service.
Got it and two.
To that point are you starting to see the results of your investments within the community oncology and this quarter or is that all still to go.
Yes, we've we've built out our community faulty team and we'd be getting to see and all the benefits of that plan and strategy. We don't break out those numbers, but what we can say is that we're very pleased with the results that we've seen so far over the last three months.
Okay got it and then given all the advances that Medicare is doing to drive more kidney transplants, what should be the underlying growth rate of that market for the next several years and of all the programs that have been announced a round kidney transplants and essentially moving people to.
Form a kidney transplant.
What else needs to be done by either see a mass or others to get to that doubling of kidney transplants in five years.
And that's a great question, Alex and you know that's something that maybe I I am happy to to take on a little bit to understand that dynamic better because you know there are very few industries for only 20% off the supply in all the demand is actually met but if you're thinking about for every transplant that we do there are five more that we could.
Do if we had enough.
After Oregon, and so there is this latent demand and increase of Oregon's will tremendously accelerate life of patients and the entire industry and ultimately benefit security X is about so doubling of the organs are within five years I think that is a stated goal, we probably had a bit of a curve ball. This kobe.
19, but we see DRAM spend senders already back to full swing and many transplant centers are actually well above the previous year. So so I have no doubt that there is a lot of opportunity that we can do now the most important element is the is that number one people.
People go and donate organs number two is that these opioid always these organ procurement organizations are efficient and effective and I think there's a lot of room to grow in the future.
That's great and then just last question for me it looks like we're entering what would be called the third wave here in the U.S. for the Cobi cases, with your you know everyone's eyes and ears equity ex focus on the transplant centers. What are you hearing about another way regarding transport volumes are they pursuing more shut down.
They're slow down like April or may or do they know how to better manage the virus now that translates well continue.
Yes, thanks likes it I mean, what we're saying is that region by region Center by Center response, and as even some variability.
Within locations and what we found is they built that covering more than 150 transplant centers across the United States. We have really good insights into what they need and want and I think in response to a coated re my track continues be an offering where we have seen continual increase more than hundred 50 try.
Spencer has today, so I think that ability to.
Respond react needs has been really important for us across all different organs from kidney to hot and also long.
That's great well I appreciate it thank you.
Thanks, Alex we look like we have a question from Andrew Cooper Raymond James. Please go ahead Sir.
Hey, guys congrats that Peter in right.
A lot of kind of the coursing coverage, so maybe I'll take it a little bit of a different direction into the product bucket just as we think there's now obviously your access to us.
Okay centers.
Going into potential customer being limited.
When we think about the European markets and the competitive environment and your access there you know whats the passive or how should we be thinking about the past for particularly our <unk> yeah.
Yes, DNA as you try to maybe move more into that European market in the post transplantation space.
Yeah on the on the on the product side I think you know if you look at the timing business I might just kind of that so I see that requires demos and demonstrations I think what we found there as we've shifted pretty much to what we've done the U.S. to virtual server prices and I think that would be like to see more basketball because they build building the best in class virtual.
Knocking kit, which is being recognized by many got kids as well. So I think thats from the lighting business ex <unk> excuse me I think in terms of a cell free DNA. We continue to have strong interest and and I think this is Mary where we continue to work with and without the benefit of having some infrastructure.
Russia, particularly in Europe has enabled us to do that nothing is we have many.
All that other folks anyway. They can you can lead to some supporters valve sales actually being you know talking today colleagues in Europe as well to make sure that they just continuation of.
Information flow as well as what is so much excitement about altschul.
And now translating ex us now seek a cell free DNA.
Okay, Great that's helpful and then.
I know it was it was sort of brought up in a question already but just as we think about kidney.
Kidney care [laughter].
Sorry about that.
As you think about kidney care is there anything.
You know that you take away from the conversations you had weather with with potential customers or anywhere through the pipeline around heart care that have changed how you think about the potential for that for that product longer term.
Yeah, I'd say I think that's really I was about to our leading to that because I think what hopkins benighted demonstrated strength that we've been trying to push we further innovation as many of you know in the Sarnia were the first to bring gene expression profiling to try and staying with the first to bring cell free DNA into transparent I think if you look at the combination of the Multimodality approach its really.
Really important in total okay, though that was the first you know accrued three.
Three mold ex demonstration and for us it really validates a outrage became showing that we can be a child.
I mean, one thing that's never lost on Capex is drive innovation like that we do every day.
And it's in front of what we want to do is as a company. So in that sense translating that to kidney care. We've taken the same approach and I think in addition to the cell free DNA and the gene expression profiling. We've also added.
They believe I box, which is really all day algorithm and try and try and think that we will make a meaningful difference. In addition, we've also got you are mapping hes not this additional offerings that we're working on as well. So again this kidney care.
All these really the foundational base you try and track.
Okay, Great and maybe just one more you know after the.
Equity raise earlier in the years, we think about you guys potentially being more.
More active in the M&A landscape, just any any common and sort of what you're seeing out. There has had some of it is perhaps some players financially where you know more is bubbling to the surface or anything we should think about in terms of where you may or may not be looking at any update.
Yeah, I mean, it would be equity raises it got us to be at a ratio similar to our piece at least to the to the median that's the first point I'd like to make secondly, you know we had multiple business lines not just the testing services, but we also have good products and digital businesses and there are multiple opportunities velocities that we continue to mature.
Sure and being discussed so it's like that is probably about normal cost that we believe that.
There remains to be attractive and we'll see what happens is we kitchen monitor those.
Great I'll stop there thanks.
The next questions from sung Ji Nam.
The T.I.G. Please go ahead.
Hi, Thanks for taking the questions and congratulations to both Peter and rise.
Was I was wondering about Alice your long could you remind us what the market opportunity. There is a in lot of transplant I'm, just trying to get a sense of.
How many bronchoscopy procedures to patients undergo.
For which actually monitoring you know in the first year and then.
Following the first year.
Yeah, I would think of El show lung as you know similar size to the hot there about 3000 patients in terms of that opportunity now with lung transplant patients. This is sort of one of the you know high mortality conditions and with that there actually.
It's a lot more and testing in the first year and so I think with the.
Protocol frequency that we're sort of establishing his originally initially to sudden fulfil that we believed that maybe with some of the feedback we're getting that Todd. This is Rick there's need to continue this.
Maybe even high speed balance as we look at that.
Yeah, and you know just to reiterate what what what rich was saying you know lung has one of the problems that these patients don't live for the 10 to 15 years, they've been seeing kidney and heart, but they probably you know have a.
Five year five year survive. So in terms of the tail. This is I'm not not as a big opportunity, but it's very exciting because the unmet need is so significant and so the publications that rich was talking about we have no three major publications on on on cell free DNA. Our other short in lung, which is very exciting. So I you know I think.
Yeah, we benefit of taking the existing platform go into this field, which is very a chastened and might be able to quickly became <unk> accelerate on loan.
Great that's helpful and the recent Medicare and C. D. A announcement, which obviously it was largely a non event, but just kind of curious is that something you guys might pursue into future I would or could there be any benefit from between B and C. D. Route.
You know I think that the reimbursement landscape in molecular diagnostic continues to be above I think the company in general has had a phenomenal run in making sure that our products are high value diagnostics products and are recognized as such.
I think we were very comfortable with the current approach to mold X, which is a data driven approach and getting through reimbursement through moldings, and then noridian, but we were constantly evaluating although other routes. So you know maybe going dual track one day might be an opportunity with a a combination between the FDA and the Central office office.
The approach, but right now I think you know the heart care reimbursement is really a poster child on how we have thought through combining our multi modality offerings and we're very comfortable with the current approach.
Gotcha, great into maybe a couple of quick ones for Mike on the what we see ourselves revenue contribution this quarter and then would you be able to split the volume outlook.
But.
The report volume for Allomap Heart, I personally doubt that Oh, I'm, sorry, I was your kidneys this quarter for it for you I got here today.
Well first of all on on our sales.
Similar to a similar to the previous quarter, but less than a.
Hundred thousand dollars. So you know it's still early days yet for the LSL.
To be announcing more on that as well.
Move forward.
Switching out the volumes.
No I I know now I think the way that we look at testing services in total commercial volume.
For both Allomap and I will show and so yeah. The volume was 21800 for the quarter, which was you know fantastic growth, but no. We're not we're not splitting that out.
Okay sounds great. Thank you so much.
Thank you.
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We have a question Nick Chen H.C. Wainwright. Please go ahead.
Thank you for taking my questions first question is which factor contributed more football engrossing patient results. This quarter is the penetration in transplant procedures at each transplant center, all patients, becoming more compliant with surveillance protocol with Remo track.
[noise] yeah, both it being you know Nathan levers for us, but I think you know the whole market outgrowth is being the driving the protocols and we continue with more than 50 protocols continued to grow each quarter. So it's such a seasonal candy for US is <unk> center develops the Alice shore.
Specific cell free DNA protocol.
And maybe to add to this you know.
We're so early is still that there's new patients coming onto the platform. All the time. So you know we're right now it depending on how you look at it the 5% to 10% penetrated. So the growth is primarily still driven by new patients coming onto the platform. While at the same time retro was mentioning with outpatient care managers, we might edge up on the compliance rate ended here in Spain.
Right now our growth continues to be very dynamic by by new patients being added to the platform.
Got it. Thanks next question is sales and marketing expenses have shown that decreasing trying to as a percentage of total revenue for the first three quarters do you expect that trend to continue.