Q1 2022 Biodesix Inc Earnings Call

Hello, Thank you for standing by and welcome to biotech six first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session.

A question. During this session you will need to press star one on your telephone please be advised that today's conference is being recorded.

Require any further assistance. Please press star Zero I would now like turn the conference over to Chris Wendy. Please go ahead.

Thank you operator, and good morning, everyone. Thank you for joining us today for a discussion of biogas ex first quarter 2020 to business highlights and financial results.

Leading the call today will be Scott Hutton, Chief Executive Officer.

I'll be joined by Robin Harper Cowie, Chief Financial Officer.

After the prepared remarks, we will open the call for Q&A.

An audio recording and webcast replay for today's conference call will also be available online as detailed in the press release announcing this call.

Today, we issued a press release announcing our business highlights and financial results for the first quarter 2022, a copy of the release can be found on the Investor Relations page of the company website.

Actual events or results may differ materially from those projected as a result of changing market trends reduced demands and the competitive nature of bio deaths six industry.

Such forward looking statements and their implications involve known and unknown risks uncertainties and other factors that may cause actual results or performance to differ materially from those projected.

The forward looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the company's annual report on Form 10-K for the year ending December 31st 2021 filed with the Securities and Exchange Commission on March 14th 2000.

'twenty two as well as in subsequent quarterly reports on Form 10-Q filed during 2022, if applicable additional information concerning factors that could cause results to differ materially from our forward. Looking statements are described in greater detail in the company's press release issued today and in the company's filings with the S. E C.

I would now like to turn the call over to Scott Hutton, Chief Executive Officer Scott.

Thank you Chris as a reminder, bioethics is a patient centric lung disease diagnostic company with a mission to unite biopharma physicians and patients to transform the standard of care and improve outcomes with personalized diagnostics.

In the short time since our last earnings call. We've had a very productive end of the quarter and are looking forward to the rest of 2022.

Beginning with our financial performance, we reported total revenue of $6 5 million and core long diagnostic testing revenue of $4 6 million, which reflects 17% year over year growth.

Like many of our peers performance in the first half of the quarter was affected by the COVID-19, Omicron variant, which significantly impacted the month of January and February with practitioners patients and many of our buyer at a six team members getting COVID-19 and staying home to recover which resulted in an overall revenue decrease versus fourth quarter.

2021.

While we do not plan to talk about individual monthly results in the future. We do want to share more color about sales performance in the first quarter to highlight the rapid and strong recovery, we experienced following the omicron wave.

We're pleased to report that the month of March produced the highest volumes for our core long diagnostic tests in the history of the company.

We saw sales access and activities rebound to pre pandemic levels. In April continued this trend with a higher number of core lung diagnostic tests per business day than March giving us continued confidence in our current 2022 revenue guidance of 37.5 to $39 5 million.

Stepping back for a moment, we began the year with what we believe is one of the most comprehensive suite of diagnostic test targeting the large lung disease market with an estimated combined total addressable market of $29 billion.

We have five blood based test on market that support clinical decision, making across the lung cancer continuum from initial risk assessment of lung nodules with the noted by lung testing strategy to post diagnosis treatment guidance and monitoring with the IQ lung testing strategy.

The notified lung testing strategy consists of two blood based proteomics test notify CDT and notify X L. Two which are used by physicians to assess the risk of malignancy of a lung nodule.

This helps prioritize high risk lung nodules for invasive diagnostic procedures, while also helping avoid unnecessary procedures on very low risk lung nodule.

Since launch in early 2020, we've successfully driven adoption of notified long despite the challenges presented by the COVID-19 global pandemic.

Ongoing positive feedback and advocacy from our customers as they gain more experience with notify lung further validates that we are only beginning to realize the full potential for these tests to change the standard of care in lung nodule risk assessment.

Moving to IQ lung, we started the year with a full commercial launch of the genus threat N. G. S test, increasing our therapeutic guidance portfolio to three blood based tests, including the genus Strat targeted DD PCR genomic test and the various threat proteomics tests.

Offered as options within IQ lung testing. These tests are used to inform treatment decisions and monitor for the rise of resistance mutations while patients are on therapy.

The genus Ret N G. S tests launched in January with Medicare payment already secured.

Adding the NGF tests means we can now offer the option of broad sequencing of circulating tumor DNA and RNA with a turnaround time of 72 hours the.

The fastest of any test available in this space.

This complements the more targeted gender strat DD PCR test introducing flexibility in addressing individual patient and physician needs.

Feedback from our physicians has been incredibly positive since launch reinforcing the importance and competitive differentiation of the rapid turnaround time and coverage of both DNA and RNA genetic alterations by this test in summary, we're pleased with adoption over the last four months.

Continued support and investment in data generation to demonstrate and reinforce the clinical utility of our test is another critical factor for future growth.

We expect the upcoming full data readout and publication of our Oracle study on notify X O. Two will further support our sales and reimbursement efforts for the test.

Additionally, we look forward to providing further updates on our ongoing insight study for the IQ lung testing strategy. The altitude study of our notify test in the Beacon study for primary immune response or immunotherapy guidance test and our further development efforts for our pipeline risk of recurrence test.

We've said it before and cannot reiterate enough lung.

Lung cancer kills more people in the U S annually than the next three cancers combined and time matters when treating these patients.

We pride ourselves on bioethics ability to quickly provide critical results and insights back to health care providers with best in class testing turnaround times for all of our test to improve patient care.

We believe we've just begun to scratch the surface of this $29 billion market and we have both the team and the products to drive growth in 2022 and beyond.

Speaking of our team and as previously discussed we doubled the size of our sales team in 2020. One as we grew from 24 to 48 team members. We believe our commercial team is critical to continued growth and as such in line with plans. We've added another five sales team members in.

The first quarter of 2022 to increase our coverage and promoting and selling the complete portfolio of core lung diagnostic test.

With a large greenfield opportunity in our existing territories. We will further expand this team in 2022 and beyond as long as we continue to see the levels of productivity experienced thus far with sales team members paying for themselves on average and four to six months.

Moving to our biopharmaceutical partnerships and services business, we reported revenue of <unk> $9 million for the quarter, reflecting the COVID-19, Omicron variant wave in the first half of the quarter impacting prospective study enrollment and shipping of samples.

Overall, we continue to receive positive feedback and interest in the bioethics diagnostic cortex proprietary AI and machine learning platform and our broad multi modal and multi omics service offerings.

Our ongoing efforts in advancements and explain ability and transparent AI will provide unique insights and clarity to health care professionals by providing the ability and potential to identify key biologic mechanisms driving specific outcomes for patient subgroups that may require a different approach or different treatment.

Overall, we remain confident that we'll see growth in revenue from increasing demand for our service offerings.

Lastly, we've made considerable progress strengthening the company's financial position to ensure that we have the funds and resources to execute upon our growth objectives.

In addition to the $50 million committed equity facility that we announced in March were also pleased to announce a new term loan for $15 million.

Private placement of $11 $7 million and a revision to our integrated diagnostic asset purchase agreement milestone payments to extend the time to pay and provide near term financial flexibility.

Now, let me turn it over to Robyn to review the first quarter 2022 financial performance Robin.

Thank you Scott.

First quarter total revenue of $6 $5 million was in line with our expectations and compared to $28 9 million for the first quarter of 2021 represented an increase in revenue from our five core long diagnostic tests and offset by an expected decrease driven entirely by the year over year change in <unk>.

Covid testing.

As a reminder.

The first quarter 2021 reflected significant COVID-19 diagnostic testing revenue, which we did not expect to be repeated in this last quarter.

Our first quarter core long diagnostic testing revenue was $4 6 million from total volumes of 4300 tests versus 4.0 million from total volumes of 3100 tests for the first quarter 2021 the.

The growth in test volume was primarily driven by our notify CDT and notify XL to tax.

As Scott referenced gross in the quarter was impacted by the latest wave of Covid Army Cranberry Fortunately the impact from omicron decreased as quickly as it came and we saw a rapid recovery and a record month in March.

Biopharmaceutical services revenue was 0.9 million compared to 1.7 million in the first quarter of 2021, a decrease of 45% as we have said this business can fluctuate due to several factors, including contract timing and project execution, but in this instance reflects the continue.

The impact the pandemic has had on overall prospective clinical trial enrollment and shipping samples needed to complete the projects and recognize revenue.

We ended the quarter with up to $7 $5 million contracted but not yet recognized $2 5 million of which is currently on the balance sheet as deferred revenue as we have already collected the cash.

Corporate testing revenue was 1.0 million in the first quarter versus $23 2 million in the year ago quarter.

The first quarter 2022 was slightly higher than anticipated due to the army Crown Spike in January and February we have consistently projected that COVID-19 testing as a percentage of our revenue would drop off as compared to the prior year as testing shifted to rapid.

At home antigen testing.

We expect this dynamic will continue throughout 2022.

Gross margin as a percentage in the first quarter 2022 was 51% versus 37% in the first quarter of 2021.

Improvement in gross margin over the year ago quarter was primarily a result from the shift in mix in sales to our higher margin products of our core long diagnostic testing and the sequential decline in COVID-19 testing revenue.

Gross margin decreased sequentially over the fourth quarter 2021.

Due to higher than expected corporate revenues, which have lower gross margin and due to the full launch of our German <unk> MTS test, which creates a drag on margins in the initial stages of launch as we get to scale.

The gross margins for each of the other tests remains consistent we expect that the overall gross margin as a percentage.

Italy increase over the course of the year.

Operating expenses, excluding direct costs and expenses were $17 8 million in the first quarter 2022, compared to $16 2 million for the same period of 2021.

The year over year increase seen in the quarter was primarily driven by increases in sales and marketing expense from the doubling of the sales force in 2021.

Operating expense includes $1 $3 million in noncash stock based compensation.

The net loss for the first quarter 2022 was $15 6 million compared to a net loss of 7.0 million for the first quarter of 2021 the.

The increase in loss is attributable to the decrease in total revenue from COVID-19 testing in 2021 and the growth of the commercial organization in 2021.

We ended the quarter it was $16 4 million in cash and cash equivalents a decrease from the prior quarter due to a net loss in the quarter and our scheduled payment to integrated diagnostics at $4 6 million as we announced this morning, we've negotiated the integrated diagnostic payment schedule reducing required.

Payments by approximately $7 5 million and $7 2 million in 2022, and 2023, respectively. The complete details can be found in the documents filed with the SEC the.

The cash balance as of March 31st 2022 excludes $11 $7 million raised in our April private placement and the new $15 million got deal announced today.

Turning to our outlook for 2022, we are reaffirming our previous guidance and anticipate 2022 total revenue to be between 37, 5 million and 39 and a half million.

Over the course of the last six months, we have taken a variety of steps to add access to additional funding and reduced our cash burn all while focusing on continuing to grow revenue in 2022 and 2023 we.

We will continue to focus on liquidity enhancements that will enable us to maintain focus on revenue growth and accelerate our time to profitability in.

In 2022, we will invest in projects and hires that results in near term revenue growth, while implementing additional cost savings measures that will impact the second half of 2022 and 2023.

Now, let me turn it back over to Scott.

Scott.

Thank you Robyn so as you've just heard its been a busy and productive quarter on all fronts IMAX.

I'm extremely proud of the bioethics team and excited for us to continue to grow as we progress through 2022.

<unk> team remains steadfast in our commitment to one improve the lives of patients impacted by lung disease to integrate biologics testing into physician practices, providing all of the testing needs for a lung patient through the continuum of care one patient one trusted company multiple test person.

<unk> results.

Three discover and develop new diagnostic tests like our risk of recurrence and primary immune response to test.

For lead the way with AI explain ability and transparency.

Five conduct numerous clinical studies to demonstrate and reinforce the real world performance of our test and fix grow and expand our biopharmaceutical partnerships to aid in their research drug development clinical trials and development of companion diagnostics.

In closing I would like to thank all bioethics teammates for their dedication to the biotech sticks mission vision and culture, which revolves around our collective commitment and daily contributions to positively impact patients lives.

With that I will turn the call over to the operator for questions.

Okay.

Thank you.

To ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Our first question comes from Brian Weinstein with William Blair. You May proceed with your question.

Hey, good morning, guys. Thanks for taking the questions I appreciate it.

Just a couple for me first you said April trends were better than our record March So obviously April a record as well but.

Is there anything that you can provide.

US in terms of kind of what that trajectory sort of looked like so that we can get a better idea about how quickly things are recovering here.

Yeah. Good morning, Brian Thanks for the question.

As we've as we've stated we really don't want to get down to projecting monthly numbers going.

Going forward.

We feel as if there's a pretty significant.

Interest and continued ramp will give greater clarity on the next earnings call.

But most importantly, we're excited to get back to what we deemed as kind of pre COVID-19 access physicians focusing on early detection in diagnosis of cancers, which we know is critically important and as we continue to grow the sales team obviously more feet on the street with increased access.

Gives us great prospects of continued growth and we feel really good about where we're at.

Speaking about that team.

Can you just remind us how the team is being deployed here with multiple tests that they are selling you know what what what is kind of in the sales comp plan here is all growth equal or you're focused on volume are you focused on docs just give us some idea about how your incentive in the sales force and where you want to spend their time.

Yes, Great question, Brian we Havent given specifics of the individual comp plan on a on any given year, but it really is focused on growth and that volume or that matters. Most is getting into accounts and so we reward and compensate both for expansion rate going out and getting new accounts to begin ordering and then once we get in.

<unk> kind of that land and expand type approach there, we can get more ordering physicians with an account.

But we compensate equally it really is about volume growth across the portfolio, we want our sales professionals to sell the entire portfolio of lung diagnostic products again being the only company with five on market products focused on lung, we think that gives us a significant advantage that once we land in an account.

It gives us the ability to deploy additional test providing value.

That's ultimately our goal is as a patient progresses through that continuum of lung cancer care, we want to be that trusted provider to provide insights at each and every touch point or clinical visit.

And what kind of guidance you could give them on.

Pulmonology versus oncology and the two different call points yeah.

Yeah.

We traditionally start with with Pulmonology.

We know with notified that that's the largest market opportunity that exists for US. We also know most importantly that if you can go earlier right. The earlier, we can help physicians detect and diagnose cancer the higher the likelihood of a positive outcome. So we start there and then as if you think of an integrated practice as a patient progresses through that.

Continuum, there's numerous handoffs our sales professionals are guided to build those relationships. We have in the past highlighted the difference in the nuances between those two call points and we've referenced utilizing our medical science liaison team our medical Affairs team and we've also continued to grow and expand and adding.

Collagen specialist.

We're not going to come in and expect one sales professional to be able to answer every single clinical question and understand every clinical trials. So we'll have specialists that support them through that is that helpful. Brian Yes. It is thank you and then Robyn for you.

Okay.

I appreciate all the all the work that you guys have done on strengthening the balance sheet in a much better position today than you were obviously just a couple of months ago and that's good to see how should we be thinking about cash burn for the year I don't think I heard you give any kind of any guidance on that and I did hear you talk about cost saving measures that would be impacting the <unk>.

Second half of 'twenty, two and 'twenty three can you be more specific about what those are and just overall, how we should be thinking about burn this year.

Sure.

Focusing our operating expense on near term projects.

Projects that drive near term revenue.

As Scott stated, we do anticipate continuing to add to our sales and commercial organization as all.

<unk> across the year, so would expect to see some increase in the sales and marketing expense as we.

And frankly, the associated department in sales and marketing that support increased volume.

As our revenues increase.

Over the course of the year.

And into 2023, we expect our burn to drop off okay.

<unk> 2022 and into 2023, and we really are focused on.

Driving to profitability as quickly as we can.

Okay.

We'll follow up with you on this call.

I have some more detailed questions on that but I. Appreciate it guys. Thank you so much.

Thank you Brian .

Thank you our next question comes from.

Canaccord you May proceed with your question.

Hey, Scott and Robin Thanks for the questions.

Thanks for providing the Courtland test volume and you gave a nice year over year comp I guess first I was wondering if you're going to be providing that going forward I don't I think this is the first quarter that you've provided that metric and then it was helpful. And then it looks at that volume grew faster than revenue I. Just was wondering if you could talk about the year over year ASP trends seem to have decreased I'm just wondering if thats.

Basically so we due to the <unk> test.

Thanks.

So it's it's due in part to the N. G. S test just launching and so starting off with with Medicare, but really working on the others, but also heavily due to CD teeth. So as you know we do not yet have Medicare coverage for our notify CDT tests.

As the overall test volume growth was driven primarily by growth notify XL, two and notify CDT that notifies CDT pending revenue status really does drag down the overall asps, but we are very pleased that byproduct our asps have been very consistent so.

Once we have that Medicare milestone, you'll see you'll see a jump there.

Okay. Thanks, Robin that was helpful. And then on gross margin you called out some good commentary on like you know what to expect I guess going forward and why that was weaker or softer this quarter.

It sounds like that's two factors the first being NGF startup cost dragging down margins and then the.

Kind of over.

<unk> outperformance I would say on Covid I'm just wondering.

On the startup cost I, just wanted to understand that a little bit better is that.

Is it just not exactly or is it actually like denial rate or cash question and things like that that actually have to have to do with like reimbursement that's a.

Those things could maybe be a little bit more.

Systemic rather than just startup and I know Cobra dragged down the margins too I mean is it just safe to assume you can run but you can like returned to the <unk> level, maybe in the second quarter and beyond.

So great questions with the N G. S. It really is start up costs. So there's a lot of fixed costs, particularly for NGF technologies.

With running.

Certain number of samples per plate and if you don't have complete plates. Obviously your cost per sample are are higher.

So the biggest drag for us really was in that that new new tests startup.

Yes.

We are.

As for second quarter and looking at gross margin.

Expect us to.

To get close to that but we would anticipate as we were continuing to ramp N. G. S. It'll take us a little bit to ramp up to that.

Number.

But we are making great progress on.

With our suggestions and that growth. So I would anticipate that the second quarter is maybe a little less than our than the fourth quarter from a gross margin perspective, but pretty close.

Alright, perfect and just a few more for me and maybe Scott you could be.

Could chime in as well.

Josh just one of the main questions around the test heading into the launch was.

Just the competitive positioning given the multiple similar products in the marketplace and in the past you've called out turnaround time, and it's focused role in the test on containment continue them as kind of key differentiating factors.

Just wanted to revisit that given it's been on the market for <unk>.

Third of a year basically at this point, what's the feedback been like from a competitive perspective, and do you stand by your original commentary around like differentiation of the test in the marketplace.

Yeah. Thanks, Scott Great question definitely feedback.

Feedback has been positive it's been consistent with our assumptions.

We're receiving a lot of a lot of positive commentary on turnaround time, we've always said that current turnaround times are previous turnaround times prior to our launch Werent acceptable.

And we're actually getting that we're finding a number of physicians that are verifying that rate kind of the trust, but verify approach and their commentary is wow.

Why can't others do that what are you guys doing different and we are seeing traction in those accounts right.

Right now we've talked about this test having the ability to be utilized across multiple cancer types.

We still see the majority of physicians that are utilizing the test today.

On lung cancer, but we are starting to receive additional inquiries and so we feel really good about it we stand behind the product and adding it to our portfolio of products has done exactly what we said which has made it a little more robust when Europe bioethics sales professional and you knock on a door today not only can you come in with broad.

This portfolio of products, but you can make a commitment that youre. The only sales professional that is going to be able to provide those critical clinical insights at multiple time points. So much more to follow there Kyle I think you highlighted how recent that product launches, but right now we're very excited about what we're hearing what we're seeing in <unk>.

We still think that this will this will add to our growth trajectory in the future.

Perfect. Thanks, Scott I appreciate that if I could just ask a final question. It's great that you reaffirmed the guidance if I'm doing the math right. It looks like the guide continues to assume well over 50% year over year growth in the core business.

Impressive youre won't keep performance was obviously tempered by Omicron I just wanted to ask if in order to meet that growth objective that I stated and maybe kind of similarly robust growth targets in future years like how much do you have to increase your sales force over the next two.

<unk>.

ETE et cetera months.

If you could call out any plans specifically.

That'd be that'd be great as well thank you.

Yeah. Thanks that was a great question.

We stated or at least I stated earlier, we're going to be very mindful about that we're not blindly going to continued to state or strive to double the size of the sales force.

We're really focused now that we've got traction.

And some experience over the last 12 months expanding the sales force. It really is about their contribution and how quickly they can get to sales rep productivity numbers that we feel strongly about.

What we have experienced and seen as no surprise to anyone as we expand into new territories, where we haven't had prior coverage that ramp time, and onboarding time can take a little bit longer.

Where we have a good foothold and were dividing or cutting territories and adding reps as you can imagine they scale much more quickly. So for US you may have noticed we stated we added five this really was the first quarter over the last four to five quarters, where we didn't have six and so we're tempering that to.

Make certain that we can get that return. So we'll continue to update you as we progress through the year. We know right now that when you add a sales professional like we said it can take four to six months. So if we expand in the second half of this year, we want to be mindful of that expense knowing that the return will really happen next year.

So it is about growth.

And again the most important thing is that we bring in the best highest quality talent, which we're really excited about the talent level of of the <unk> sales team and we know that competitively.

They are out knocking on doors and gaining access that we didn't have pre pandemic.

Alright got it perfect. Thanks, guys I'll talk to you soon.

Thanks Kyle.

Thank goodness shingles from Max Masucci with Cowen You May proceed with your question.

Yes.

Hi, good morning, Thanks for taking the questions.

Yes.

So I know, it's largely out of your hands at this point, but it would be great to hear.

And we could see final Oracle publication hit.

And if you've had any recent interactions with N CCN guideline members or other guideline consultants.

Because she groups it'd be great to hear whether you see potential to sneak into the next end CCN update les.

Later, this summer or it's more prudent for us.

Set our sights on potential N C C N guideline inclusion.

And more of the you know call it 2023 time frame.

Yes, good morning, Max welcome to the call. Thanks for the question.

Yeah Oracle.

Goal is to have that published this year like you said much of that is out of out of our hands and out of our control and review times.

But we feel good about where we stand with that to date.

And as we receive feedback from the potential publisher.

Obviously, what we're going to respond in a timely fashion to ensure we do everything we can to get that out as soon as possible so more and more to come on that hopefully by the next earnings call, we'll be able to give greater.

Clarity and guidance on where that that and when we expect it to be published.

When it really comes to guidelines I think we all know in this space, you've really got three different groups that provide guidelines.

With N C. C N. As you referenced you have ACP, which of the chest guidelines and then you have the Fleissner Society.

One of the things we've watched is the cadence of updates so we're mindful that ACP or the chest guidelines.

I have really not updated much throughout the pandemic and if they did they really focus more on the pulmonary components related to Covid. So we're excited and eager to see ACP.

Initiate some updates and guidance, we think we've done a good job of putting ourselves in a position to.

To be that company that can help represent blood based diagnostics, gaining inclusion into those guidelines in CCN. They update more more frequently and similarly, we feel like we've put ourselves in a good position there.

The Cleveland Clinic Foundation, just had a meeting about two weeks ago.

A lot of great dialogue as you can imagine the attendees at that meeting are really luminaries in the space.

Multiple presentations and an ongoing discussion.

We were able to update many positions that we believe are involved in making some of those decisions answering their questions and giving additional input. The reason that's critical as we come out of this pandemic, we've got to be mindful that we havent had face to face interactions in nearly two years.

Just to remember and as a reminder, ACP is tied into chest. There has not been an in person chest meeting since the 2019. So in essence, although we've done with notify has occurred without having in person meetings. So.

It's a great question, Max and where we're focused on is getting that face to face interaction updating physicians not hoping that they can read something or catch up in and we're off to a great start we've had a lot of interest in inquiries and again, we think we've done everything we can to put ourselves in a good position.

Is that helpful. Matt Yes.

Very helpful summary, I appreciate that Scott just final one for me would be curious if you had to point to this specific offerings or bio desert capabilities that are that you expect to drive.

Biopharma collaboration wins here in 2022 that would be great to hear and then.

What sort of resources or are you dedicating towards new Biopharma contract wins. This year are there any specific customer types are biopharma services applications, where you see the current Biopharma services offerings.

Fitting in the past.

Yeah. Thanks, Matt It's a really good question. The one thing that we continue to spend time assessing as has biopharma changed the areas that theyre focused on rate as they come out of a pandemic what clinical trials.

Are they kicking back off what new ones are they starting where are they spending kind of their energy time and money.

Right now it's still early but we're really pleased with what the dialogue I think the one thing that differentiate believe me. There's a couple of things that differentiate us one is the breadth of the portfolio and offering like you said, having a multi ohmic multimodal approach really means in its simplest form as you translate it is we're not.

Wed to one single platform technology, and so I think as as.

Biopharma comes out of the pandemic, they're really starting to ask those questions. It's no longer just DDP.

<unk> and NGL based questions on on what's going on genomic Lee.

Seeing a lot more questions about the patient's immune system, what's going on with proteomics, we've seen a lot of proteomics players over the last 12 months to 18 months enter the space and so it's still early but as is really if not the only company one of the only companies that's commercialized.

Three L. D. Ts that are proteomics based you can imagine we're getting a lot of questions as to how we've done that how we've done it at scale.

And why others can't so that's one area.

And extreme interest in the dialogue continues to increase I think the other is really going back to <unk>.

That I think is underappreciated about bioethics and Thats that we were in AI and machine learning in the mid two thousands. So we've got over 12 to 15 years' experience with AI and machine learning our proprietary diagnostic cortex.

Is a differentiator right, we utilize it to discover new assays and test.

Getting a lot of interest from Biopharma to continue to do that and that's very promising the other component of that as you may have seen that we really started focusing on what we call a.

I explain ability.

And we're pleased to state that on a proteomics level, we're seeing proteins and peaks that we've never seen and so we hope and plan on disclosing here in the coming months and quarters, what that means and how it can translate but I'll give an example.

We've actually been able to highlight and demonstrate the exact specific proteins that we measure with our various stress test and so we're going to be rolling some of that information out that is.

Significantly different than what some of our peers are able to do and see so we want to leverage that and as you can imagine Max.

Biopharma when they can see those individual proteins that give them targets and those conversations are starting to expand so on the biopharma front as much as we are disappointed with where we are to date the number of ongoing conversations the number of dollars under contract and the number of.

Agreements that were currently negotiating gives us great hope that we will see tremendous growth in biopharma in the coming months and quarters.

Is that helpful Mac.

That's great really appreciate you taking the questions.

Yeah. Thank you Max.

Yeah.

Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from with Morgan Stanley . You May proceed with your question.

Hey, good morning, this is neil on for pages.

Could you remind us on your expectations on timing for notify C. P. Reimbursement this year and then a quick follow up on that.

Yes, we continue to have great conversations with Medicare and remain.

I'm confident that we will start to see some payments.

Notify CDT here in this second half.

I would anticipate later in the second half but.

We will update you as we have more from our Mac.

Thank you and Robert I know you touched on gross margin improvement through the second quarter earlier in this call, but any additional color on the cadence through the back half of the year and how the potential reimbursement increasing genes drive volumes might play in your expectations towards the fourth quarter.

Sure absolutely.

I expect us to see some pretty good improvement steady improvement from first quarter into second quarter and into the third quarter.

In.

Coverage for notify CDT and.

NGF test volumes.

I would expect us to get.

Close to that 70% Mark.

Which is still under where we were prior to launch of the new tests in 2019.

Getting back up towards that.

Stronger sort of 70%.

Range.

Thank you that's very helpful and so beyond the sample shipment delays that youre seeing on the Biopharma side, any other ongoing supply chain or pricing pressures carrying through to the business.

Supply chain has been okay.

<unk> talked about it a few times before at the beginning of Covid, we formed a team.

They have diligently worked to ensure that we have not had any supply chain disruption and no business disruptions and I'm very happy to say that that has continued.

We like everyone else are seeing the impact of inflation and rising costs and rising shipping costs. So.

Just increases in supplies travel shipping.

What everybody else's dealing with so we do see that reflected in overall.

Travel and and goods and you see that in Opex, but from a supply chain nothing at this point disrupting supply chain.

Thank you and one last from me I apologize I'm not sure if I missed this during the prepared remarks, but should we anticipate any major updates that Oscar.

Yeah, Great question Neal.

We don't have a major readout, if youll recall, our insight study historically, we've targeted <unk> as kind of an interim analysis.

That study enrollment slowed throughout the pandemic as most clinical studies and trials did and so we're right now at about 4500 patients.

You may recall, the targeted enrollment with 5000 patients. So we're actually looking at.

Next <unk> or prior to that hopefully closing out the study and reporting out on the 5000 patients enrolled.

Yet we will have a significant presence at <unk>, because we launched the NGF tests. This year. So as you may recall historically for us at <unk> bio.

Pharma presence was heavy this year will have both a large biopharma and sales of our commercial footprint presence. There. So we're excited to start those conversations are another way of looking at it is <unk> is the first in person meeting, where we'll be able to highlight and promote our full portfolio of test.

For Pulmonologists and medical oncologist, and so we think that's a great opportunity and again the last time, we were able to do this without disruption was 2019, so that in person meeting here at the end of May is critically important for us I highlighted what we've seen and done on the AI.

Blaine ability front, we hope to have additional opportunities to discuss what we're doing with various threat and also.

What we're what we're how we're going to incorporate those learnings into our pipeline products both risk of recurrence in primary immune response, so we're expecting <unk> to be a big meeting and going forward. We think our presence will continue to increase at <unk>.

Great. Thanks very helpful.

Yes. Thank you.

Thank you and I'm not showing any further questions at this time.

This concludes today's conference call. Thank you for participating you may now disconnect.

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