Q3 2023 CareDx Inc Earnings Call
Good day, everyone and welcome to todays Codexis, Inc. Third quarter 2023 earnings conference call.
At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing the star and one on your telephone keypad you may withdraw yourself from the queue by pressing star. Two. Please note. This call is being recorded and I'll be standing by if.
You should need any assistance.
It's now my pleasure to turn the call over to Greg <unk> Managing director. Please go ahead.
Good afternoon, and thank you for joining us today earlier today <unk> released financial results for the quarter ended September 32023.
Or at least is currently available on the company's website at Www Dot <unk> dot com joining.
Joining the call today is Alex Johnson, President of charity excess patient and testing services object changed Chief Financial Officer, and Robert Woodward, Chief Scientific Officer also joining the call today is Michael Goldberg chairperson of the board.
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 are.
We are a nation of historical operating trends expectations regarding coverage decisions pricing and enrollment matters and our financial expectations and results are based upon current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results could 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 of descriptions of the risks and uncertainties associated with our business. Please see our filings with Securities and Exchange Commission.
Information provided in this conference call speaks only kind of live broadcast today November eight 2023.
<unk> disclaims any intention or obligation except 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.
Conciliation to the most directly comparable GAAP financial measure maybe found in today's earnings release with the FTC.
Now I'll turn the call over to Alex.
Thank you Greg.
Good afternoon, everyone and thank you for joining today's call.
I'm, Alex Johnson, President of <unk> patient and testing services and member of the newly formed office of the CEO, along with Michael Goldberg Chairperson of the board and ASIC Jamie CFO.
I'd like to begin today's call by briefly covering the CEO transition, we announced last week.
Michael <unk> are aligned on the importance of executing against <unk> strategic priorities and increasing shareholder returns while the board conducts its search for a new CEO.
We have strong confidence in our leadership team and in the entire <unk> team to move the company forward.
For those of you, who I've not yet met I have managed care <unk> largest business the testing services business for the past two years.
Prior to that I had responsibility for our lab products business as well as for business development.
I have been incredibly fortunate to have worked with Michael security after the IPO nearly a decade ago and with Abbott shack for the past two years.
I've also been privilege to work with Peter Maag, who many of you know as our former longtime CEO and current board member for the better part of 15 years, gaining from our time together at Novartis.
On behalf of clarity, we thank ray for his contributions to advanced transplant care during his tenure.
We have a strong foundation for future growth and we wish him the very best.
Moving on to our third quarter performance.
Today, I'm going to discuss our third.
Order performance and results discuss our decision to raise full year 2023 revenue guidance and finally I'll provide additional context around the transplant market environment and our patient advocacy efforts.
In Q3, <unk> reported revenue of $67 2 million, an increase of 7% as compared to normalized second quarter 2023 revenue.
Normalized Q2 2023 revenue.
<unk> excludes the previously discussed the financial impact of $7 8 million related to Medicare claims billing that were held over from the first quarter 2023 and recognized in Q2 revenue.
Our Q3 revenue for testing services came in at $47 8 million growth of 5% compared to a normalized second quarter of 2023.
Our patient testing services result grew 2% quarter over quarter to 38400.
After the period of uncertainty in the last few quarters, we now see a baseline being set in the testing services business as patient testing services volumes appear to have stabilized.
We continue to be well placed in the transplant market, which is growing and is expected to continue to grow.
Next our digital transfer solutions business, it was 33% year over year to $9 9 million driven by organic growth from our recent acquisitions.
Some of our earlier acquisitions are beginning to scale nicely, helping us to drive operating leverage and strengthening our moat.
Our lab products business realized revenue of $9 5 million.
With year over year growth of 33% driven by the success of our Ngls based portfolio.
We are pleased with our improved performance, which is the result of an enhanced focus on driving revenue and improved efficiency in lab products, which has been an ongoing effort.
We are pleased with our continued progress to actually reduce our overall expense base.
<unk> mitigate the billing article impact lower full year revenue on our results.
We will continue to look for ways to be more effective and efficient.
Our adjusted EBITDA loss was $10 9 million in the current quarter as compared with normalized adjusted EBITDA loss of $18 1 million in Q2.
Our goal is to be operating cash flow and adjusted EBITDA positive and we were pleased to show demonstrable progress on this metric.
We have confidence in our outlook going forward.
As announced last week, we are raising guidance and now expect <unk> full year 2023 revenue.
To be in the range of $274 million to $278 million.
<unk> will provide additional details during his remarks.
In light of our strong cash position and believe that our stock is currently undervalued.
We'll continue to Opportunistically pursue stock repurchases as part of our previously announced stock repurchase program.
Next I'll discuss our reimbursement coverage.
In Q3, two previously announced catalysts came to fruition.
We received Medicare coverage for Alistair long and for heart here.
Since its launch in 2021, Elisha along has become increasingly valuable for lung transplant patient care.
Hardware multi modality coverage was approved for surveillance.
This has established a path, but multi modality reimbursement they can be generalizable for other testing modalities in our portfolio, such as Allomap kidney and Europe map.
We continue to focus on increasing commercial payer coverage.
For example, one national plan and three regional plans expanded coverage for Allomap heart to start at six months.
Compared to one year.
We also gained coverage for two new regional plans for Alastair kidney.
Moving to catalysts.
When we have talked about catalysts in the past we've highlighted a robust pipeline of clinical testing solutions, which is exciting.
And we will continue to cover in future calls.
Today, I want to highlight progress on a slightly different catalysts.
<unk>, which can facilitate greater payer coverage for <unk> kidney and that is Kayla K.
K oar, our kidney allograft outcomes registry has now completed the last clinical visits in Q3, and we will next move to data analysis.
We anticipate a publication in 2024.
<unk> has the potential to provide additional insights to payers, including Medicare with respect to the clinical utility of Alistair kidney, including surveillance used in a wide variety of kidney patients.
Our priority is to be good stewards of capital in this new environment.
To invest in our strong businesses and pipeline products that help us to deliver on our mission to bring innovation to transplant patient care, while also creating the most value for investors in the short to mid term.
Our strategy has not changed we have nearly a quarter century commitment to improving transplant patient outcomes extending long term allograft survival and this will continue we are confident that patients and investors can both benefit from the innovation and commercialization expertise of security X gene.
Next I wanted to address the conversations around G. L. P. One drugs and their potential impact on kidney transplant volumes.
There are about 550000 dialysis patients in the U S and only about 25000 kidney transplants per year with Oregon supply continuing to be the limiting factor.
While it's DLP drugs have the potential to delay or may eliminate the need for dialysis in some patients. There is also the potential to help increase the number of dialysis patients eligible for a kidney transplant.
The overall health or reducing their BMI.
With respect to supply it may be useful to note the potential impact of G. L. P drugs on the living dark pool, which is a major driver of kidney transplant volumes.
Living donation volumes have the potential to increase beyond current trend lives as potential donors become healthier due to DLP ones and feel more confident to donate their kidney.
Before I turn the call over to Avishai I would like to touch on our advocacy efforts on behalf of transplant patients. We have been actively engaged in discussions with Medicare and HHS as well as helping to support legislative action and advocacy efforts to restore full patient access for Medicare beneficiaries.
We have made good progress to date.
On August 15th a bipartisan group of 14 members of Congress wrote the CMS administrator Chiquita Brooks mature to challenge CMS to reconsider these new limits on access to critical molecular tests that benefit transplant patients.
In September the Wall Street Journal editorial Board published three editorials decrying the rollback in coverage for Medicare patients.
In mid September multi X held open meetings for public comment on the proposed LCD.
<unk> was proud represented at both the multi X Palmetto and then Iridium open meeting on molecular testing for allograft rejection.
We in the blood transplant community will continue to fight for access to transplant innovation.
With that I'd like to turn the call over to Avishai to discuss additional details on our quarterly results and outlook and we'll go from there to Q&A.
Sure.
Thank you Alex in my remarks today, I will provide some additional detail on quarterly financial results.
That's doing back of the building because the vision on our financial and close with an update on guidance.
Unless otherwise noted my remarks will focus on non captive.
Also my comparison with Q2 'twenty three does exclude the financial impact of $7 8 million related to Medicare.
Hello work from the first quarter of 'twenty, three and recognized in Q2 revenue and Netflix normally second quarter. Please.
Please ethical GAAP to non-GAAP reconciliation.
Information.
Key highlights of Q3 results were number one reported revenue of $67 2 million or <unk>.
Revenue of $47 8 million increased approximately 5% as somebody who normally.
Quarterly revenue of $45 6 million.
Patient testing services volume appears to be stabilizing as it increased 2% as compared to the last quarter.
Number two our product as the last patient in the solutions businesses delivered another strong performance with each business growing, but what 30% it'll be yet.
Number three adjusted EBITDA losses were paid down $10 9 million as compared to $18 1 million in the normalized second quarter.
Before collections were 103% of our reported.
Revenue, making it the fourth consecutive quarter of net positive cash collection number five we maintained a strong cash position of $268 2 million.
And last but not the least.
He concluded its liquidity and does not intend to recommend an enforcement action against the company.
Given the strong results in the third quarter 'twenty three we are raising our revenue guidance for the full year 'twenty three.
$274 million to $278 million from our previously announced guidance of $2 $40 million to $60 million.
Moving to the detailed reporting testing services revenue for the third quarter was $47 8 million.
Estimating 5% as compared to a normalized EBIT of $45 6 million in the second quarter.
Before we take testing services volume for the third quarter was approximately 38400 <unk>.
2% as compared to the last Florida.
The volume increase was distributed across all of them.
In the third quarter multi X covered hodgkin for use in heart transplant surveillance for the first 12 months post transplant.
Okay, that's not meeting the country's criteria but.
Not with nice in revenues in Q3, most notably in adoption of the building market.
Lastly, our revenues in Q3 was positively impacted by a one time claim settlement with a large Medicare advantage bids outstanding team.
Our non-GAAP services gross margins were 74% in the third quarter of 2003 as compared with 73% last quarter.
Our normalized second quarter testing services non-GAAP gross margin was 68%.
Our second quarter gross margin included the one time benefit of the claim settlement as discussed previously and the benefit of accurately it gets worse.
This will now be paid academic debate.
Now turning to other businesses.
Ah patients and digital solutions business recorded revenue of $9 9 million a growth of 33% in the third quarter of 43 as compared to <unk>.
non-GAAP gross margin improved 10 percentage points to 39% in the third quarter as compared to 29% in the same quarter last year.
Gross margin expansion has been driven by the organic revenue growth.
These cost saving initiatives and higher gross margin profile of a new acquisition.
Our products business delivered $9 5 million in revenue in the third quarter of 23, an increase of 33% as compared to the same quarter last year.
non-GAAP gross margin improved to 58% in the third quarter of 2003 as compared to 44% in the same quarter last year.
An increase of 14 percentage points.
Our goal is to continue to look for opportunities to further improve gross margin for this business.
We are continuing to work on site consolidation that's been streamlined manufacturing operation increased efficiencies throughout our supply chain and importantly patient care.
Turning to operating expenses and are just really been done.
non-GAAP operating expenses for the third quarter was $57 7 million down approximately $1 2 million sequentially from Q2 2003.
The decrease in <unk>.
R&D and sales and marketing spend of $4 4 million as compared to last quarter was driven by the full quarter impact of the five action related to workforce reduction.
<unk> investments in R&D and continued cost savings and discretionary spend.
G&A expense increased $3 2 million as compared to last quarter and driven by base litigation matter and our response to the billing Hospital Division.
They are actively working to reduce these transient elevated expenses.
For the third quarter of 2003, we reported negative adjusted EBITDA pinpoint 9 million compared to normally negative adjusted EBITDA of $18 1 million in the second quarter of <unk> 43, an improvement of $7 2 million as compared to last quarter.
We are pleased with the progress we have made introducing adjusted EBITDA losses.
Turning to cash we continue to maintain a strong balance sheet with cash cash equivalent and marketable securities of $268 2 million and no debt.
For the fourth quarter in Nashville, our collections were greater than 100% of our testing services.
We have now collected over $22 million incremental cash in the last four quarters.
As a reminder, we have expanded our collection program to include overdue payments from commercial and Medicaid payer kindred to Medicare advantage.
I would also like to note that we earned $3 2 million in interest income in the third quarter of 2003.
As Alex mentioned earlier based on our cash position and believe that our stock is currently undervalued.
Can you make to opportunistically pursue stock repurchases.
Turning to the impact of billing box cause of vision on our financials and mitigation plan.
First billing article revisions agri complexity and uncertainty that were disruptive to our business.
In the past two quarters the focus our efforts on operational implementation of Bolivar to the quadrant, both internally and with transplant centers.
We made great progress and the results speak for themselves in terms of new cast of adoption and supplementation.
We are pleased to report that POC adoption put out kidney and heart testing services was over 90% at the end of September I hate the initial target.
Second in Q3 23.
In testing services volume stabilize across Oregon, and we have implemented necessary changes in our billing and revenue recognition processes.
As you heard from Alex We believe we are seeing a P <unk> <unk>.
Our previously announced closer election program is largely complete helping us partially offset the impact of the building blocks on our financials.
Our goal is to be operating cash flow in our district EBITDA positive based on this new level of revenue.
And we have levers to bridge the gap number one profitable organic growth number two.
Reimbursement of unpaid Ted number three reduced G&A expenses, specifically elevated legal spend and finally drive further deficiencies did not operating expenses.
We are actively pursuing each one of these levers.
Finally, turning to guidance.
Based on the strong results in Q3, 23 bps easing by full year 'twenty three revenue guidance to be in the range of 210 before to $278 million, an increase of <unk> 6 million ethnic point.
Our revised guidance number one assume Medicaid reimbursement remains as currently implemented.
Number two assumes approximately $4 million in revenue headwinds going into Q4 associated with the full quarter impact of pocket that at all.
Allstate after new coverage criteria, both noted in adoption and the one time settlement with the large Medicare advantage payers, but outstanding teams and number three we also assume approximately 5% lower testing services volume due to Q4 seasonality around the holidays and potential weather disruption.
Based on our assumption of a new revenue based on being safe and with viable levers to bridge the gap to be cash flow and adjusted EBITDA positive, we do not expect the need to raise cash in foreseeable future.
We continue to be proud of the operational excellence and financial discipline demonstrated by the entire team during the quarter.
With that I'll hand over to the moderator to open the line for question.
At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question.
We will pause for a moment to allow questions to queue.
Yeah.
Yeah.
Yes.
Yeah.
Yeah.
Our first question comes from Andrew Cooper Raymond James.
Hi, everybody thanks for the questions.
Maybe first just want to make sure I caught you right akshay.
On the gross margin dynamics. So can you just give us some maybe a dollar amount for the one time settlement. Just so we can sort of adjust for that and then as we think about the trajectory from there.
Does <unk> really feel like the stable place.
In terms of.
The cost of goods on testing services can look like is there more room to improve on that front or is it purely started her reimbursement calculus to continue to see the gross margin rise.
Yes, Hi, Andrew good to talk to you in.
On the gross margin side for the testing services.
No.
The 74% is slightly higher because of the couple of one time event that I called out in the couple of even as I called out in my guidance pivot about $4 million.
We're going to think about the gross margin going forward I think you're back to Q2 normalized gross margin, which was about 68% now having said that we have made more progress on our gross margin in Q3, so modeling in about 70% may not be a bad idea number one and number two of course, we continue to look forward.
More operating leverage come in as well to grow and as we move forward, but more to come on that.
As we go forward and probably in the next call.
Okay helpful and then.
I appreciate you sizing the heart surveillance headwind in <unk>.
Just curious in terms of whats maybe on the docket to try to fight for expansion of that beyond.
Beyond that 12 month window do you need incremental studies do you feel like there is a way to take what you already have and maybe repackage in a way that that can move the needle there just how should we think about the trajectory there on heart care and potentially expanding beyond 12 months.
Hi, Yes. This is Robert thanks, Thanks for the question.
We do see opportunities in various studies and publications that we anticipate coming out both from <unk> and from some of our.
Customers are key.
We are using these tests and publishing independently so.
So we will be tracking those and looking for those to make a difference sometimes in 2024.
Okay, Great and maybe just one last one quickly with the closing of the FTC issue.
Without any.
Any decision to move forward from the body anything else you can provide in terms of Doj or the UK audit in terms of progress has there been ongoing conversations.
What's the timeframe, we should think about potentially hearing.
A closure on the remaining outstanding.
Sure.
Inquiries.
Yes, sure Andrew in fact.
The whole <unk> <unk> that we previously disclosed in the month of September.
I think that the letter.
We are not taking any kind of soft enforcement action.
We are extremely pleased with this outcome.
And of course, we were looking into the matter so similar too.
The civil investigative demand that we have received from the Doj So having.
Having this later and the confusion from ACC.
Outcome for us as far as the.
Jason Thanks.
I would be speculating if I were to kind of.
I'll provide more color there.
Just wanted to see that be accommodating this matter has been on pace for a couple of years.
And.
We'll see as to how soon the macro.
It would be resolved, but nothing more to say on that on the Doj side, David do you want to talk about the UK.
I could mention just you pick.
There was no.
Some movement on that in the quarter and they.
They havent requested any additional claims or taking other actions obviously like any of these audits, we intend to appeal them. There's always an ongoing appeal process and eventually you get to an independent review at some point.
Great I will stop there and let others ask I appreciate the time.
Our next question comes from Matt Sachs Goldman Sachs.
Hey, guys. This is Chris Schott on for Matt.
Just wanted to get your bulkier.
Thoughts on what Youre looking for in a search for a new CEO and what the duration of your search looks like.
Sure This is Michael.
I'll take that one we're looking for.
Body, who can continue to execute the strategic plan that we are currently on.
Improved performance and deliver long term profitable growth to our investors.
My experience. It generally takes six to nine months to install that's why identified with to install a new CEO. So.
All right.
The board is entirely confident.
The executive leadership team in place today to be able to put the plan together, but they will be solely responsible for executing in 2024.
Great. Thank you.
Our next question comes from Brandon Couillard.
Jeffrey.
Thanks. This is Matt on for Brandon I appreciate all the color around kind of volume stabilizing and then the number of initiatives underway to get to adjusted EBITDA and cash flow positive calls anymore clarity you can provide in terms of timing on those now that you feel more comfortable with.
The cost actions and kind of stabilization of volumes, how should we think about when when you could hit those targets.
Yes.
I'll probably take it Mike.
A step back here that last year in Q3.
It has taken the ground that we're going to be profitable in the first half of this year and had we not been impacted by the building because we would have been profitable in Q1 of this year.
Then we were hit by the building article and if you recall in the second quarter.
Our testing services dropped by almost $25 million on an apples to apples basis that I called out in my market.
So you are looking at about $100 million gap to bridge there.
And if you look at the district, EBIDTA now, which is about $11 million for the current quarter I think.
We are extremely proud and pleased with the progress.
On this particular goal.
Returning to operating cash flow positive in adjusted.
Adjusted EBITDA positive.
Specific timing, we'll provide more color in our next call because we have multiple levers as I was kind of alluding to that.
We have probably be secular growth is a constant volume market and they're not testing services volume and then of course, how we are able to kind of.
Get paid on some of the tests that we're not getting paid because David with renewed focus on the coverage and everything.
And of course, if you need to be more thoughtful or not.
Operating structure and be more efficient and effective.
On the table too. So there are multiple levers and we have made good progress.
Feel comfortable ABR, but in terms of the specific timeline, we wait for the next quarter call that we have a bit more information as to how things are stabilizing.
Yeah.
Thanks.
Our next question comes from Mark Massaro.
<unk>.
Okay.
On for Mark Thanks for taking the questions I'm sure last quarter, you discussed a clinic hesitation around ordering kidney surveillance testing.
It appeared like this dynamic might be behind us.
Just discuss what factors or headwinds that have rolled off for you to drive the volume in Q3.
Just remind us of any one time benefit of prior period collections that happened during Q3, I know you spoke about that the Medicare one timer, but just any other one timers that we should be backing out. Thanks.
Okay.
Thanks, and I think we're really pleased with some of the progress that we've seen over the last six months.
One of the one of the effects of having six months to do this as a lot of the transplant centers now have have had time to update their systems their procedures. The education, So where I think there was a lack of understanding of not just how to do things, but to do now clinicians have had enough time to absorb this and it really institutionally.
What theyre thinking so we're look we're very much looking ahead and feel very good that these centers had a very good understanding of where theyre ordering is today and opportunities for the future.
Sure and let me take the second part of your question.
On the one timers in Q3.
Now the couple of those pieces. The first one is.
After that in order to be an adoptive one billing RT, Colombia hard care.
Notwithstanding that revenue pool staggered option does that mean going into Q4, the revenue that we recognized for those hotcakes hedged price of the Nordic and adoption that will not be at that level going into Q4, and the thinking either one time settlement and the number is about $40 million for these two events.
That's the piece that I would call out on the one time, but other than that there isn't anything material that would need to be Martin from the from the numbers standpoint.
Okay perfect.
I'd like to provide on when we might see a readout on the choice study can you just remind us what studies is completed or underway that support the use of heart care and just how you're thinking about additional evidence generation is that correct.
Yes.
Sure.
Actively.
Performing analysis on the shore data.
Including data monitoring.
It is an ongoing study.
We're looking at an interim readout and so working on putting that together with a goal of getting some communication.
Two publications out in 2024, just a reminder that.
Alex sure Heart and Allomap parts are both already covered with.
Without restriction on time.
The question earlier about extending beyond 12 months is only for the combined <unk> results.
In many cases.
When docs have specific.
Neat and reason and desire for best management of their patients to order heart care, we're working with them.
Two.
For payments for those from Medicare into appealing and denials.
Yeah.
Our next question comes from Alex Nowak, Craig Hallum Capital Group.
Okay, great. Good afternoon, everyone I wanted to go back around the CEO transition, maybe just expand on the departure of Reg. There's obviously a lot of moving parts here with the story.
I think the company needs a leader out there to navigate through all those moving parts why the departure now and just how important is it for the board to name a successor fairly quickly here to guide the company during the challenging time.
Yeah, Alex it's Michael.
These are complex situations and theirs.
Elements of it that are personal in nature. So.
Im not going to provide much more on that other than to say it was mutual and the time was right.
In part the time was right because.
The company Board wanted to set themselves up for success in 2024, and we're into the planning process for establishing that.
Budget and operating plan now so we wanted to make sure that.
Extraordinarily capable group.
Senior leaders that ratio cultivated.
We're in a position to.
100% responsible for constructing that plan, because they're going to be 100% responsible for its execution.
Now.
We think that the executive team here is stable.
Zinc there.
Extraordinarily high.
Capable well qualified and experienced in this business.
And by virtue of the structure that we've set up an office of the CEO with.
This shock, Alex and myself, we meet on a daily basis.
There is.
No Mr beats.
We're decisions differed.
We're operating the business as a functional CEO.
So we're prepared to operate in that fashion until the board is comfortable that we've got.
<unk> identified and install.
So.
I wouldn't worry.
In fact I would be.
Cautiously excited.
Yeah.
Okay understood I appreciate all the information there and then again on the revenue and the cash burn we can kind of go into a little pieces there.
But just to kind of level set us if we take the revenue from this quarter call. It $270 million on an annualized basis is that going to be a floor that we can then grow off of for 2024, and then same thing on the cash burn. If you just look at the cash change about $60 $60 million of cash burn annualized this quarter.
Yeah.
I assume that's got to be the low point here and we're only going to get better on the going forward is that is that all correct.
Yes, Alex maybe a couple of changes in those assumptions.
Firstly on the cash for example.
Overall reduction of about $14 $5 million that includes tier of investing activities, we called out the acquisitions that you can look at how the operating cash that's about 10 million Bucks.
That probably would be the first piece that I would call out and maybe the second piece that I would suggest when the cash burn to have a look because we were impacted by the billing articles in Q2.
The testing services impact of the billing article in the last two quarters and how much cash burn could be really has on the operating side in the last two quarters that would give you some sense as to the cash burn.
Would probably be in vaccines.
Full bag.
Without companies, taking any actions and then I called out that look at how do I reduce that cash burn.
So the reduction in the cash burn again comes from the multiple levers that we are currently assessing.
On the impact of the billing article from say $100 million to now we are just really bigger losses of 11 million Bucks independent quarter.
We need to bridge the remaining gap.
<unk>.
Revenue growth the secular growth that could be outdated in the market their transplant volume market has been growing in the high single digits and how we can do to kind of grow.
<unk> 15 services volume alone say back that could be a first labor. The second lever of course is going to be that how do we continue to work with our commercial payers, we improve the coverage and continue to expand our collections program to be able to get paid how we have been paid in the last few quarters to reduce the cash.
And of course, the third lever that is definitely on the table is looking into our cost structure, specifically all the legal expenses. If you were to pay down the SG&A beat the <unk> back to the levels. We were seeing in the second half of last year prior to the billing multiple impact then it gives you another thing.
As to how much higher.
<unk> spent has been because of the billing article so we have the levers here to be able to reduce that cash burn I'll basically makes it an assumption.
I'm in the ballpark and I'll provide more color on most of the.
Next earnings call.
The $15 million not the cash burn.
In my mind up for the quarter.
Excellent very helpful. And then just a final question here I was looking through the 10-Q during the prepared remarks and I.
I don't reimbursements.
Tricky item and I'm, just trying to understand the interpretations on some of the hardcore language in the 10-Q. The tank you talks about letters being submitted should know radian, claiming why heart care should be covered and so the question is really is the iridium actually reimbursing for heart care right now and the company is getting paid for that or is it more care to exit.
Asian that nordion should be getting paid for hard care.
So Andrew.
This has been a yogesh.
<unk> been very complicated and we want to be more transparent in our 10-Q and we've provided the disclosures. It has a lot more detail, but let me unrivaled actually you won't be hot cure basically after the noted in their adoption, which was a 16 full stack we have not.
Revenue recognized any test on the Hot Kid, which is not for sale and then greater than one year. So thats completely out so that's exactly what it is nothing more than that.
In compliance with what.
<unk> adopted.
<unk> 16 is that simple as that so the baseline has already been said based on everything which is out there.
From the billing like at this time point and what we've been obstacle in the company.
Okay Super helpful. Thank you so much.
Yes.
Our next question comes from Mason cargo Steve.
Stevens.
Hey, guys. Thanks for taking the question. This is Jacob Cramblit, one for Mason I appreciate the color around.
Volumes funding like a more stabilized level this quarter actually increased slightly sequentially, but just wondering given you found it stabilized level given the multi port iteration to the building article in the LCD as well as the recent coverage wins with hard care could you maybe give us some color whether qualitatively qualitative.
Quantitatively on growth across Oregon, tied specifically heart and kidney.
Yes sure I can this is Alex I can give a little bit of context on that Jake.
I think for the growth in volumes and testing service volumes. This past quarter, we saw growth from all three organs.
And so we felt very good that this is this baseline now has really created the stabilization that we can grow from.
Alright got it thank you.
Our final question comes from <unk> <unk>.
Hotel.
H C Wainwright.
Alright.
Thank you guys. This is depeche on <unk> could you, perhaps clarify if you expect to see any further updates from multi X. We got in the coverage of molecular transplant tests as part of routine monitoring.
<unk> organ organ rejection.
I think where we're at right now is that after a couple of iterations of billing article and the perspective of the community that those were changes to coverage.
And then.
Proposed a draft LCD.
That is now open for comment and so it was the open comment period for two of the Max has already passed two more are in process and then we would expect them to move forward and based on the draft and the condensate received produce.
Final coverage policy from that and so that's I think what we would expect to happen.
We can surprise in the past and different from our expectations, but that's the normal process and the timing around that.
We're often asked and that's.
Sometimes before August of next year that there's a rule, but it has to be finished before their original draft.
It was released.
Got it that's very helpful and then lastly.
How long do you expect the test involved the testing volume to grow sequentially going forwards.
So I think we're certainly.
In this quarter certainly there's nothing that would make us change from the guidance and the thinking that we've seen so far so I think now that we've seen a baseline being set I think there is there is growth ahead of us and we'll have to see how the quarter plays out certainly in terms of.
Weather and winter storms, and such but we're feeling like we've certainly had some stabilization in our baseline that we can grow from.
Got it that's very helpful. Thank you very much for the detail.
We have no further questions in the queue at this time I would now like to turn the call back over to today's speakers.
Great. Thank you we wish you the very best this afternoon. Thank you all.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Yeah.
[music].
Okay.
Okay.
Okay.
Okay.
Hum.
Mhm.
Uh-huh.
Okay.
[music].
Uh-huh.