Q1 2021 CareDx Inc Earnings Call
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Greetings and welcome to the Coeur D Ex Inc. First quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question. The answer session will follow the formal presentation.
Anyone require operator assistance during the conference. Please press Star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Greg how to check from Gilmartin Group. Please go ahead.
Thank you good afternoon, and thank you for joining us today earlier today <unk> released financial results for the quarter ended March 31 2021. The release is currently available on the company's website at Www Dot Carroty ex dot com.
Sito, Chief Executive Officer, and author of Deborah Chief Financial Officer of will host this afternoon's 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 facts should be deemed to be forward looking statements.
All forward looking statements, including without limitation, the our 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.
For a list and description of.
Of these risks and uncertainties associated with our business. Please see our filings with the Securities and Exchange Commission.
The information provided on this conference call speaks only to the live broadcast May five 2021.
<unk> 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 be will also include a discussion of certain financial measures that are not calculated in accordance with the generally accepted accounting principles.
Reconciliations of the most directly comparable GAAP financial measure maybe found in today's earnings release filed with the SEC.
Now I'll turn the call over to rich.
Thanks, Greg.
Good afternoon, everyone and thank you for joining us.
Welcome to Katie ex as first quarter of 2021 earnings Conference call.
We had a very strong start to the year with a record first quarter result.
Our vision of being the leader in the transplant ecosystem continues to resonate as we remain focused on the transplant.
As the largest transplant focused company the U S. We have.
Proud to be the leader in innovation by bringing the first.
And best in class transplant specific technologies through element of gene expression profiling and <unk> done of derived cell free DNA.
Notably, we again first in driving new transplant innovation.
We recently introduced the first and only recognize multi modality approach with hard kit, which lays the foundation for kidney care in future years in other organs.
I am proud to be leading the company continues to invest to bring innovation, especially on the field of transplant, which is often overlooked.
As the CEO of Kt ex I'm continually being told or should I say reminded that we are of the transplant company on the.
A half of Kt ex Im proud to accept that title and association.
For a record first quarter total revenue was $67 for me, an increasing 76 per cent compared to the year ago quarter.
The driver of the quarter's growth was our testing services revenue, which increased 18, 9% the $59 3 million and we also saw the products revenue increased 23% to $5 8 million.
Digital and the other revenue added $2 3 million to the top line.
GAAP net loss for the first quarter was the 0.0 $7 million and adjusted EBITDA was positive $7 $7 million.
We remain focused on driving top line growth through increased adoption of our offerings and continuing to invest in our rich pipeline across the transplant journey.
During the first quarter, we made significant progress along the following three fronts, one advancing our testing services model.
Two expanding our direct to patient strategy and treat.
Building on future pipeline through investing in specific scientific data and the innovation.
I'll tackle the first one advancing on testing services model.
In the first quarter of Kt ex provided approximately 33000.
200, <unk>, Alex short Allomap test results to transplant patients growing approximately 121% from the first quarter of 2020.
Of the approximately 5900 of tests with part of hardcore.
Our focus has always been on our direct to center strategy with more than 150, kidney and more than 100 heart centers using our offerings during the first quarter.
We feel very good about our strategic focus on building a moat around the center.
As of the end of March of the 60 kidney transplant centers, the United States have now adopted and Alice Shaw named testing protocol into the standard of care.
We've also continued to expand on the incentives with.
With the prior acquisition of Alta, we've seen the benefit of operating transplant specific software to improve U S. Based transplant centers all the workflow in January we announced the acquisition of <unk> LLC and electronic health record software provider supporting U S transplant center needs.
This acquisition added over 20 centers using trend shot.
We believe offering and efficient end to end solution. The transplant centers will lead to further adoption of our high value health care solutions.
Our strategy this strategy the focus on the transplant centers to build adoption of protocols has been very successful.
In addition, we recently started expansion of the comedian fraud setting.
During this quarter and now with the full team for the first time, we had more than the 100 community practices start using <unk> in the last quarter with several already starting protocols.
Our community dedicated team is doing a great job.
Although early we have been very pleased of the ability to continue outpatient care from the incentives the community without patient care managers and throw Allocher app.
This focus on innovation was evident firsthand as the recently announced universal solid organ transplant LCD by Palmetto Nordics now provides a pathway for our future pipeline and multi modality surveillance approach to be introduced.
We are proud to be leading the way, especially with multi center and prospective datasets to generate the clinical ability and utility for patients physicians and payors.
It takes the lead it to invoke change and we are grateful as leader to all of the patients physicians coordinators caregivers who've worked with us as leaders and leading change and bringing much needed innovation to the transplant journey.
We talked about Alice Shaw of lot of update in Q3 at our last earnings call, but the recent universe of LCD now includes the possible on the <unk>.
Universe of LCD can accelerate adoption for lung surveillance and our pipeline. We previously submitted our technical assessment of <unk> alone and we look forward now to a review of the submission within Q2 2021.
Yes.
This model also provides a path of the future comprehensive multi modality pipeline development and which we're very excited about because of this model provides how we develop kidney care and lung for another solid organs in bridging and bringing the incremental utility is high value to physicians incentives.
Our studies have been designed and developed this way.
We look forward to updates on kidney care during the course of the year.
On the second topic on expanding <unk>.
Direct to patient strategy.
The last earnings call I mentioned, the 2021 would be of direct to patient theme, which makes the <unk> an open ended store in precision medicine.
During the first quarter, we expanded into the pre transplant patient journey and acquired TX services. The provider of TX connect <unk> connect is a cloud based service that allows nephrologist and dialysis centers to electronically submit referrals. The transplant programs closely follow these patients and assist these patients through the transplant waitlist process and ultimately.
The goal of being transplantation.
TX connect now manages more than 20000 referred dialysis patients and is fully integrated within the franchise more than 30 transplant centers in the the $500 to that as of now involved with this offering.
This offering will allow us to better serve transfer incentives as the Hudson is refer end stage kidney patient disease disease patients to assess the transplant, adding cash connect to a robust digital platform will help us provide more integrated care of every critical step of that transplant patient journey.
On the post transplant patient journey, our decision for the rapid implementation of <unk> last year as COVID-19, just the beginning to spread through the U S has given transplant patients of the option of having their blood drawn outside the confines of the hospital or transfer incentives and at the safety of the homes the spa.
<unk> the number of new COVID-19 infections decrease in the U S transplant patients is still at higher risk of getting severely sick from COVID-19 and we believe <unk> has the appropriate solution for limited transplant patient from potential exposure.
Outpatient Ken mentioned of doing a great job and supporting patients and transplant from valuable support.
With the continued impact of COVID-19, we sold the use of <unk> and mobile for about 40% for the quarter.
As of March 31, 2021, we had over 7000 patients on <unk>.
Now on the third topic on building our future pipeline through again investing in scientific data on innovation. This is the hallmark of it sets us apart throughout 2021, we will continue to build upon our interest in clinical data flow.
On to presented multiple industry day, as we continue to drive innovation and be the leader in high value solutions for clients and patients of the CAGR.
Our clinical team on the leadership of Dr share. The Lockheed has been exceptional the being very busy over the last few months as new datasets were presented and showcases multiple industry events. We continue to generate the highest number of abstracts and presentations for a transplant company and the centers around our focus innovation, which is what really continues.
The set us apart from opportunistic entry.
The testing services, we presented new transplant data in January at the <unk> Conference The American Society of transplant surgeon.
During this conference we sponsored two some periods of it with key clinical data discussing real world experiences, including Alex showed optimize care for their transplant patients with initial data from the animal study and the rollout of the Maple study for our share of liver.
For this year's ATC conference, we will have over 30 accepted abstracts and 17 to lead with science innovation, combining what we presented last last week with over 20 abstracts at the Isa <unk> conference and with the 30 from ATC there'll be coming up that's more than 50 abstracts at <unk>.
The confidence from <unk> more than 50 abstracts from one company.
Again, we're very proud of it.
Back to Admiral Admiral is a multicenter two year follow up study using patients who have had <unk> as part of the standard of care while care one of study setting isn't the only snapshot at the one year Mark for the first patients in the <unk> study.
We're really excited and proud to be bringing the first long term and only multicenter prospective data set for the transplant community and the clinical utility they show as we submit our shows into the standard of care of transplant patients.
In addition, during last month's National Kidney Foundation spring meetings with the two well attended programs featuring the latest kidney transplant surveillance data.
The pipeline for new offerings continues to strengthen with the addition of our development program for Aloidae early in 2021, we announced the partnership with <unk> by DNA to develop medicine on the infectious disease testing specific to transplant patients.
Aloidae will identify more than 100 pathogens and drug resistance and viruses and bacteria are customers of indicated very strong interest in adding the value of this testing for managing the health of the immunocompromised immuno suppressed patients.
For the products business, we saw continued transition to a hell of seek franchise represented by hybrid capture technology.
Okay.
Over half of the product revenue now comes from the NDS technology during the first quarter. We also acquired.
On the likelihood of the software company focused on next generation sequencing based testing solutions. The addition of BFS molecular software and algorithm development will further enhance our offering of world class bioinformatics and transplant surveillance software.
And for new areas, such as allo cells, we showcase the <unk> sale of transplant therapies portfolio at the recent TCT conference the transplantation and cellular therapy conference in February.
Included in those presentations was opposed to we presented without partner of tower by therapeutics on the potential use of also the standardized pharmakinetic assessment and the clinical trial, while the standard <unk>, where break cited about the value also can bring to the towers clinical trial development of allogeneic cell therapy.
The offerings and making significant difference in the transplant patient journey setting.
We are building capabilities required to scale of this business and realize the tremendous potential in front of us drill.
During this quarter, we enhanced our leadership team with key appointments and also further strengthen our financial position.
Setting with the former we announced new senior leadership appointments to create meaningful impact across these key growth areas to build for that future and to enhance the patient journey.
These announcements was hiring of anchor <unk>, our new Chief Financial Officer, <unk> brings extensive experience of the <unk> of over 25 years of finance and accounting experience achieved for the life Sciences sector.
We're really excited that anchor joined the <unk> family and I Hope you all have the opportunity to meet them. During the course of this year.
In the first quarter we.
We also significantly strengthened our cash position.
We closed the quarter with $374 3 million in cash flow and a very successful executed public offering in January.
Our balance sheet allows us to continue to drive revenue growth and take full advantage of opportunities available to us.
Our capital deployment strategy remains focused on making meaningful impact in that transplant patient journey.
As we look for the rest of the 2021, there is lots of big side balance with that I will turn of the core anchor to discuss our financials.
And our updated 2021 revenue guidance.
Thank you rich Hello, everyone I'm very excited about being a part of such a dynamic organization.
Over the past several years <unk> has transformed itself into a premier diagnostics company and the leader in healthcare solutions for transplant patients and caregivers.
On my first few weeks here at Coeur Dx My conviction has only grown stronger net <unk> is uniquely positioned to realize this tremendous opportunity.
Turning to the income statement, our first quarter of 2021 testing services revenue increased 89% year over year to $59 $3 million.
The first quarter of testing services revenue growth was driven by <unk> kidney and Allomap heart patient results and an excellent start to Alex short heart.
Our first part of our product revenue increased 23% year over the year to $5 $8 million and our digital and other revenue was $2 $3 million.
Moving to gross margins for the first quarter. The gross margin was 68% compared to a gross margin of 68% in the same period of 2020.
The non-GAAP gross margins for the quarter was 70, 70% compared to 71% in the prior year's quarter.
As you May recall last year in Q2, we successfully built on <unk> service, which has been and continues to remain a big enabler of transplant patients to limit exposure to COVID-19.
For the first quarter of 2021 net loss was zero point $7 million compared to.
Our net loss of $5 8 million in the same period last year on <unk>.
Net loss per share was <unk> <unk> for the quarter compared to a net loss per share of proteins.
In the first quarter last year.
On non-GAAP net income our first quarter net income was $7 $2 million compared to a non-GAAP net income.
Zero point of $2 million in the same period the.
The basic and diluted non-GAAP net income per share for the first quarter of 2021 of us protein.
Compared to zero in the same period of 2020.
As a reminder, redefined adjusted EBITA as non-GAAP net income before interest income tax depreciation amortization and other expense.
For the first quarter of 2021, we recorded positive adjusted EBITDA of $7 $7 million.
Compared to an adjusted EBITDA gain of zero point $2 million.
Last year in the same quarter.
Our focus remains on driving top line growth and continuing to expand our reach in the transplant ecosystem through our innovative products services and the rich pipeline and also efficiently scaling our business.
Moving to the balance sheet cash cash equivalence and marketable securities at March 31, 2021 was $374 million.
As rich mentioned, we strengthened our cash position in the quarter as we successfully completed a public offering of approximately $2 2 million shares of common stock raising roughly $189 million in net proceeds in.
In January we repaid the CMS advanced payment of approximately $25 million in full.
Adjusting for the CMS repayment and timing of certain annual outflows, our operating cash flow was neutral for the quarter.
Turning to guidance, we are updating our 2021 revenue expectations to reflect our strong first quarter results.
And continued strong demand for our solutions.
As of today, we anticipate $270 million to $280 million in revenue for the year.
This represents an increase of $15 million at the midpoint versus our earlier guidance.
Our new guidance balance as the uncertainties and on the ongoing pandemic and the continued market penetration of our products and services.
We are very excited about the opportunities in front of us and the team is off to an excellent start to 2021.
With that I will open the call for questions.
At this time, we will be conducting a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad.
The information John will indicate your line is from the question queue. You May Press Star two if you would like to remove your question from the queue.
For the using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment please poll for questions.
The first question is from Brandon Couillard from Jefferies. Please go ahead.
Hey, Thanks, good afternoon.
Hey, Brendan.
<unk>, if I just annualize.
The first quarter revenue.
That would get me to the low end of the new range for the year, which is 270 million, which would seem pretty conservative and sort of look out over the balance of the year for some of the puts and takes that would get you to the high end or above that.
The revenue outlook for the year and Occar any update in terms of some of the opex items.
For 'twenty one.
Yeah.
Yes, Brandon firstly on thanks for the questions. We are really excited about the quarter. We just had it was a great.
Great Great Q1, typically the incorporation of <unk>.
Our Shanghai for the first for the first quarter and we've got three unique business lines, which continue to grow at different rates.
Really excited about the testing services, which is growing net willing above the 50% range the.
Products business, which is on the.
The 10% to 20% range and also we have the.
Also the <unk> and.
In single digits for the digital business. So as we look on that I'm going to let Hank.
And could comment a bit about the actual.
Guidance range that we've said.
Yes, sure. So so Brandon as we were looking at the expectations for the year and considering that got off to an excellent start for the quarter average was saying.
We saw great execution by the team and excellent first quarter of both on.
The <unk> heart, the heart care as well as the penetration in the nephrology setting so very very pleased with the with the momentum there and then as we started looking at the entirety of the expectation kind of took our first quarter performance and then raised the remainder of the year at the low end you're right.
Anticipated of continued strong performance similar to what we had in Q1 the <unk>.
Presents that lower end and then high end debt represents our ability to continue to penetrate in that market, especially around the nephrology setting. Our aim is to keep working that and as we continue to make further progress on on the technology market.
Keep looking at it through the year.
Got you.
And then on in terms of algebra of heart.
On the <unk> 900 tests that you ran in the first quarter whats the capture rate in terms of the number of heart patients that are getting in our share of heart test.
As well and.
As the mix of changed at all in terms of Medicare versus commercial Payors and have you begun the dialogue with some of those commercial payers yet or is that.
He is not less of the near term priority.
Yeah.
Yes, again <unk> had the first full.
Three months and for US it is really exciting to have that fully rolled out, particularly as the day, we looked at the different attachment rates increased during the quarter I'll hand over to <unk>.
Thanks to make the full comment yes, some of them from a heart cash perspective.
We saw slightly north of 80% attach rate for a new product there on Alex short heart.
And the <unk>.
Still the there is of Medicaid mix and at the end there is a fairly high site sizable mix of commercial participation there.
Well, we expect the commercial side too slowly convert to revenue over the period of time.
I appreciate it I'll leave it there thank you.
Yes.
Yeah.
And gentlemen, please my only poll for questions.
The next question is from Andrew Cooper from Raymond James. Please go ahead.
Hey, guys. Thanks for the questions.
I guess, maybe first I wanted to I wanted to focus in on gross margins for the second lien on the passenger services side.
Was down sequentially.
Had more tax and importantly, more more allo share art debt.
I would've thought would really be driving that number higher is there anything to think about the air whether it's some of the the data generation costs and sort of R&D costs of that are captured in gross margin or how should we be thinking about that so I wouldn't expect all else equal of that maybe it was trending a little bit of heightened sort of what you've seen in the last few quarters.
Yes, maybe I'll just clarify for US then I'll hand, the entity as a reminder, with.
Yes.
Our share Hot we had prior to getting commercial approval we had.
60% of these testing done on a research basis and now it's up to as Duncan mentioned above 80%. So we've actually.
For the test previously the on the research side were not included in terms of the numbers. We provided I think now what you're seeing with the 5900 <unk>, including those of baseline for example of.
60% of our debt, so I'm going to hand over to to anchor the answer that yes.
Yeah. So on the margin side, we don't see any structural issues there.
It is one we continue to invest further in the Imitrex.
But on a direct to patient per.
Part of the journey and debt part reflects primarily in the in the testing services side of things so.
Moving forward, we do expect as we build out going on track there will be some more investments through the year, but overall from our ability to drive margins purely from our testing services perspective remains intact.
Okay. Okay. That's helpful.
And then.
Maybe just clarify I know you said range GQ for kind of the Turkish afternoon on long, but can you give us a little bit more flavor on.
What you think payment could look like when it could start in sort of.
What's the process from the areas and then maybe just lay out.
How do you think about so theres. The next next phase what the accurate along.
If the LTV changes sort of the way you approach the FERC Pms and approached on the mdx timing on any of the other organs or anything for that.
Yes, I think the.
We again, we had for the universe of LCD, we believe as the market leader It allows us now to.
Bring other solid organs in the Fray in lung as obviously the next one that would be.
We'd be bringing into the.
Of the transplant community as mentioned in the prepared statements. This discussion will happen during the course of this.
This quarter than we were.
Looking forward to those discussions it sort of brings forward some of the initial guidance we've given in.
In the prior quarter, which was we expect those discussions to have in Q.
Q3 so.
We are really excited by this opportunity of this universal city because it creates this pathway for <unk>.
Foster.
The coverage for different total wins and I think you know that we also have liver as part of the Maple study that we have with our share of liver.
And obviously you should consider that all other older.
Total of the fair game in that sense that we'll be looking at as well if we haven't already started so.
I think you will notice ladies on the space and we'll.
We will continue to bring our share across all the solid organs. So thats part of the of that approach won't change and once we do that and we'll bring the multi modality pathway.
Okay, and just just to be clear nothing from long included.
And the cash correct.
Correct.
Yes.
I'll stop there and follow up offline I appreciate it.
Thank you.
The next question is from Alex Nowak of Craig Hallum Capital Group. Please go ahead.
Alright, great. Good afternoon, everyone I just wanted to follow up to Andrew's last point there on the LCD change.
Just any comment on how the announcement changes of the timelines for kidney care here because this has always been.
Average allomap kidney has always been the kind of idea out there, but it's always been a few years out. So what studies are due on our allomap kidney how could this pull forward any sort of announcements of reimbursement there and just what to expect over the next couple of years.
Yeah, Alex it's a great question, because I think we're excited when we saw the.
Universe of LCD, because now it lays out the pathway of multi modality, but also recognizes the value of that multi modality can bring by demonstrating this in incremental clinical utility and is the first the noni company. That's done that so far in <unk>. We were really excited to see that included as part of the universe of LCD and so what that means is that we've actually.
That's what we're doing with kidney care kidney care actually looked at the addition of multiple technologies to increase the clinical utility and.
Now this universal city provides that pathway. So as we as we learn more about it I think this brings forward the potential for.
How we would view our multi modality offerings given the pace of the President's with separate day also of the guidance that provided as part of that so I think thats, probably your assumption I think he is correct.
And the studies, they're still supposed to read out end of this year early next year on <unk>.
The map kidney.
Yes, the start the study.
We will actually complete outgrow by the enrollment by the end of the EBIT there of datasets, we can obviously, bringing on and obviously one of the key things is developing.
Application Okay.
Yes, Okay that makes sense and maybe the preview of some of the clinical utility data on K Oar day.
You are going to present at the American transplant Congress, just any particular endpoints, we should be watching for signs of the egfr improvement or graft survival.
Yeah the.
<unk>.
And points of World, describing I think thinking of.
What we what was seen also of the levels Admiral study was not a bad way is the proxy of looking at it. So I think net correlations with Egfr is the right way to think about it looking at the formation of <unk> is not a bad way of thinking about it. So I think also looking at even one of the learnings from.
Different types of Bob's interpretation of the subclinical rejection. So I think as you go through the different learnings, which will highlighted through Admiral which was also a long term multicenter study, but I think one could expect to get some parallels on that.
Alright, that's great on just one more question if I could just on the vaccine debt in transplant patients. We've seen the results have been suboptimal. How do you think that influences the use of voucher on allomap relative to the standard of care going forward, because last year and even in Q1 here. It seems like there was a real pull forward of non invasive.
<unk> do you think the vaccine day, theres going to make that dynamic sticky even more going forward.
Yeah, no absolutely I mean, I think what we've learned and I've been in the field the last.
The last four weeks talking to two different doctors net as being one of the key data points, it's come up with the help patients on fully on.
<unk> there is <unk>.
Certain of these patients and how we continue to months of them even with the vaccines are available. So yes, no I'd say I think youll again, Alex share interpretation is correct.
Okay understood I appreciate the update thank you.
Thanks again Alex.
The next question.
Western is from Steven <unk> from Piper Sandler. Please go ahead.
Okay, great. Thank you congrats on the great quarter on a great to meet you Ankur.
Yes. Thanks.
So yes my for my first question, so the patient engagement initiatives, the direct to patient community Nephrologists with transplant connect allo care.
And others patient care managers. So these seem to be really working to drive adherence and new patient adoption.
Could you give us a sense of which one of those levers as having the most impact on your on your volume growth.
David on <unk> I think all of the all the different areas you mentioned, particularly.
Outpatient care managers, the use of the Ela care platform Theyre all contributing to.
Mentioned here I think.
As a reminder of where now when outpatient K managers actually.
Due to the scheduling and the calling the adherence rate is double that of when the sense of does it. So there's actually the premium service. That's offered and also this relationship that the buildings, it's all about goodness over our relationship with making the stickiness.
Be there as well and that's where the allocated platform comes in so I think all things are contributing but I think it all starts of the patient care manager.
Yeah.
Okay got it alright that makes sense and then maybe pivoting over to to Allo cell can you provide any updates on on your also of partnerships.
No you are limited to what you can say.
With your partners, but maybe without naming names could could we get a sense of on the number of partners you have and how should we be thinking about the timing of new partnerships and also clinical milestones and how youre going to update it.
Investors on progress and Lso.
Al.
<unk> cell therapy and also.
Businesses, one which has had a lot of as we mentioned excitement of interest as we've engaged with partners I think we continue to see strong interest in participation of on partners I think those two variables. We mentioned one is when we can publicly disclose those but the second also is it also a bit dependent on the progression through.
Different clinical stage milestones. So for example, with.
There was a partner whose study did not progress for example, right and so then that limited the credit process progress that was making there. So as we as we go through a new field, which we think is absolutely exciting.
This this progression is obviously important for us the these partners continued to.
Of all through the clinic, but overall I think we're still on the.
The holding of strong position.
Being the first in the space, we see strong interest and I think it's going be of partnership and learning and working with these working with each zone.
These different companies that are creating the breakthrough.
Okay, great. Thanks for the color and a final one for anchor. So you know we've talking about remote track a little bit of you guys are currently at 40%. What do you think the steady state level of agreement track will be going forward.
And how do you think about the long term impact on on gross margins and your long term goal of getting to 70 75 per cent.
Gross margins given the additional costs of.
The remote phlebotomy.
Yes, I think we are.
The levels that we are at now in that 40% give or take a few points range in <unk>.
Our expectation is that that's a good run rate.
We don't expect a substantial.
Substantial changes here in the near term and that's a view from the long term perspective, as well as to say the size of the investment that we've made substantially the presents a good structure for us for the for the medium term here.
And enables us continuing improvement in the gross margins.
Actually from a back to 75 per cent perspective, yes, I think we've made a majority of the investment there.
Okay, great Thanks, and congrats again.
Yes.
<unk>.
This concludes the question and answer session I would like to turn the call back of Richard Rich Sito for closing remarks.
Yeah.
Again on behalf of <unk> I want to say how excited we ought to have had such a great strong start to <unk>.
2021, our mission is clear on how we bring innovation and continue to make a difference in the lives of transplant patients in terms of increasing the long term outcome survival of erosion.
And so with that I want to thank everyone for dialing in today and listening to how we progress of the company and that will catch up during the subsequent Paul of course, thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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