Q1 2025 CareDx Inc Earnings Call
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Operator: Good day, everyone, and welcome to today's CareDx first quarter 2025 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.
Speaker Change: Good day, everyone and welcome to today's care Dx at first quarter 'twenty 25 earnings Conference call.
Speaker Change: 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.
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Caroline Corner: It is now my pleasure to turn the conference over to Ms. Caroline Corner, Investor Relations. Please go ahead. Thank you, Operator. Thank you for joining us today.
Speaker Change: It is now my pleasure to turn the conference over to MS. Caroline corner Investor Relations. Please go ahead.
Caroline: Thank you operator.
John: Thank you for joining us today earlier today <unk> released financial results for the first quarter of 2025, ending March 31st 2025 release is currently available on the company's website at Www Dot charity ex Dotcom, John Hello, That's not cheap Chief Executive Officer, Robert Woodward, Chief Scientific Officer, and Abbott Shook Jain Chief.
Caroline Corner: Earlier today, CareDx released financial results for the first quarter of 2025, ending March 31, 2025. The release is currently available on the company's website at www.caredx.com.
Operator: John Hanna, President and Chief Executive Officer, Robert Woodward, Chief Scientific Officer, and Abhishek Jain, Chief Financial Officer, will host this afternoon's call.
Speaker Change: Natural officer will host this afternoon's call.
Unknown Executive: Before we get started, I would like to remind everyone that management will be making statements on this call that include forward-looking statements within the meaning of the federal security 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, our examination 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.
Speaker Change: Before we get started I would like to remind everyone that management will be making statements on 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.
Speaker Change: The 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, our examination of historical operating trends expectations regarding coverage decisions pricing and enrollment matters under financial expectations and results are based upon current estimates and various assumptions.
Unknown Executive: 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.
Speaker Change: 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.
Speaker Change: Accordingly, you should not place undue reliance on these statements for a list and descriptions of the risks and uncertainties associated with our business. Please see our filings with the Securities and Exchange Commission.
Unknown Executive: For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission.
Unknown Executive: The information provided in this conference call speaks only to the live broadcast today, April 30, 2025. CARES Dx 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.
Speaker Change: Information provided on this conference call speaks only to the live broadcast today April 30th 2025, 30, ex 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.
Unknown Executive: This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable gap financial measures may be found in today's earnings release filed with the SEC.
Speaker Change: Call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles reconciliation to the most directly comparable GAAP financial measures may be found in today's earnings release filed with the SEC.
John Hanna: I will now turn the call over to John. Thank you, Caroline, and welcome to everyone joining today's call. We are broadcasting today live from Boston, Massachusetts, at the 45th Annual Meeting of the International Society of Heart and Lung Transplantation, where 60 abstracts including 19 oral talks were presented from data collected from over 90 transplant programs across the country on the use of CareDx solutions.
John: I will now turn the call over to John.
Speaker Change: Thank you Caroline and welcome to everyone. Joining today's call. We are broadcasting today lives from Boston, Massachusetts at the 45th annual meeting of the International Society of Heart and lung transplantation, where 60 abstracts, including 19 oral talks were presented from data.
Speaker Change: Collected from over 90 transplant programs across the country on the use of <unk> solutions to provide some context. There are approximately 170 health systems in the United States that have a heart lung transplant program that means novel data was presented this.
John Hanna: To provide some context, there are approximately 170 health systems in the United States that have a heart or lung transplant program. That means novel data was presented this week on the use of CareDx products from approximately half of the heart and lung transplant centers in the United States.
Speaker Change: Weak on the use of charity X products from approximately half of the heart and lung transplant centers in the United States later in the call I will ask Robert Woodward, Our Chief Scientific officer to share the highlights of several key abstracts.
John Hanna: Later in the call, I will ask Robert Woodward, our chief scientific officer, to share the highlights of several key abstracts. We made good progress against our drivers of growth in the first quarter of 2025. It was our seventh consecutive quarter of sequential testing volume growth. Our testing services grew across all three organs, heart, kidney and lung. We launched two expanded indications for Alishore, made progress with publications, and continue to execute against our revenue cycle management and market access strategies. It has been a busy first quarter and we are gaining momentum on delivering on our mission to create life-changing solutions that enable transplant patients to thrive.
Speaker Change: We made good progress against our drivers of growth in the first quarter of 2025. It was our seventh consecutive quarter of sequential testing volume growth. Our testing services grew across all three organs heart kidney and lung we launched two expanded indications for our shore made.
Speaker Change: <unk> with publications and continue to execute against our revenue cycle management and market access strategies. It has been a busy first quarter and we are gaining momentum on delivering on our mission to create life changing solutions that enable transplant patients to thrive.
John Hanna: I'll now dive into some of the first quarter performance and progress against our growth drivers. In the first quarter, we reported quarterly revenue of $84.7 million, up 18% year-over-year, and a positive adjusted EBITDA gain of $4.6 million. Positioned to build upon that performance, we are reiterating our 2025 guidance of $365 to $375 million in revenue and an adjusted EBITDA gain of between $29 million and $33 million, and our long-range plan of achieving $500 million in revenue and 20% adjusted EBITDA in 2027. We ended the quarter with a strong cash balance of $231 million and no debt.
Speaker Change: I'll now dive into some of the first quarter performance and progress against our growth drivers.
Speaker Change: In the first quarter, we reported quarterly revenue of $84 7 million up 18% year over year and a positive adjusted EBIT a gain of $4 6 million.
Speaker Change: Positioned to build upon that performance, we are reiterating our 2025 guidance of 365 to 375 million in revenue and an adjusted EBITDA gain of between $29 million and 33 million and our long range plan of achieving $500 million in revenue and 20% adjust.
Speaker Change: EBITDA in 2027.
Speaker Change: We ended the quarter with a strong cash balance of 231 million and no debt.
John Hanna: In testing services, revenue was $61.9 million for the quarter, up 15% year over year. We delivered testing services volume of approximately 47,100 tests in the first quarter, up 12% from the prior year. Daily testing volumes increased in February and March and have continued through April led by Alishore Kidney Surveillance Testing growth. Our increased sales footprint is having an impact and I'm pleased with the progress we continue to make expanding kidney surveillance testing protocols. In March, we launched two expanded indications for Alisher testing. First, Alisher heart is now the only test validated and commercially available for pediatric heart transplant patients under age seven, including infants.
Speaker Change: In testing services revenue was $61 9 million for the quarter up 15% year over year, we delivered testing services volume of approximately 47100 tests in the first quarter up 12% from the prior year.
Speaker Change: Daily testing volumes increased in February in March and have continued through April led by our short kidney surveillance testing growth.
Speaker Change: Our increased sales footprint is having an impact and I am pleased with the progress we continue to make expanding kidney surveillance testing protocols.
Speaker Change: In March we launched two expanded indications for Alisher testing first.
Speaker Change: First I'll assure heart is now the only test validated in commercially available for pediatric heart transplant patients under age seven including infants expanding.
John Hanna: Expanding the clinical indication of Alishore for this population is important because it allows us to service the entire market and shows our commitment to pediatric transplant programs. to frame this opportunity, over the past three years there were approximately 500 heart transplants annually in patients under the age of 18. The second indication expansion is for Alisher kidney, which is now validated and commercially available for simultaneous pancreas kidney transplant patients. Simultaneous pancreas-kidney transplants are primarily performed for patients with renal failure and insulin-dependent diabetes and is a growing indication because it cures both diseases in a single procedure.
Speaker Change: The clinical indication of Alice Shaw for this population is important because it allows us to service the entire market and shows our commitment to pediatric transplant programs.
Speaker Change: To frame this opportunity over the past three years, there were approximately 500 heart transplants annually in patients under the age of 18.
Speaker Change: The second indication expansion is for al assure kidney, which is now validated and commercially available for simultaneous pancreas kidney transplant patients.
Simultaneous pancreas kidney transplants are primarily performed for patients with renal failure and insulin dependent diabetes and has a growing indication because it cures both diseases in a single procedure.
John Hanna: In 2024, more than 700 patients received a simultaneous pancreas-kidney transplant.
Speaker Change: In 2020 for more than 700 patients received a simultaneous pancreas kidney transplant.
John Hanna: We also made strong strides with payers this quarter, executing against our market access strategy of publishing evidence, expanding medical policy coverage, and getting into payer networks. In the first quarter, we submitted the second manuscript from the SURE study assessing the use of heart care in the management of over 2,700 heart transplant patients at 67 centers in the U.S. As a reminder, we submitted the first manuscript from the CARE study of over 3,600 kidney transplant patients from 56 transplant centers, and we anticipate these publications to contribute to heart care and alloshore kidney coverage in future quarters.
Speaker Change: Yeah.
Speaker Change: We also made strong strides with payers this quarter executing against our market access strategy of publishing evidence expanding medical policy coverage and getting into payer networks.
Speaker Change: In the first quarter, we submitted the second menu script from the shore study assessing the use of her care and the management of over 2700 heart transplant patients at 67 centers in the U S. As a reminder, we submitted the first manuscript from the K Oar study of over 36.
Speaker Change: 100, kidney transplant patients from 56 transplant centers and we anticipate these publications to contribute to heart care and our short kidney coverage in future quarters.
Speaker Change: [laughter].
John Hanna: In the first quarter, we added 3.5 million new covered lives for Alamap Heart and 15.5 million new covered lives for Alashure test. Early in the quarter, we were issued a new CPT code for Alishore that became active for use on April 1, 2025. And as a result, we converted six of our existing payer contracts to the new Alishore-specific code and were able to obtain in-network status with a new large Blue Cross Blue Shield plan in the southeast with over 3 million covered lives. We believe the combination of additional published evidence, coverage gains, and in-network contracts will lead to ASP gains in future quarters.
Speaker Change: In the first quarter, we added three and a half million new covered lives for Allomap heart, and 15, and a half million new covered lives for our shore testing.
Speaker Change: Early in the quarter, we were issued a new CPT code for Al sure that became active for US on April one 2025, and as a result, we converted six of our existing payer contracts to the new our shore specific code and we're able to obtain in network status with a new large.
Speaker Change: Blue Cross Blue Shield plan in the southeast with over 3 million covered lives.
Speaker Change: We believe the combination of additional published evidence coverage gains and in network contracts will lead to a S. P gains in future quarters.
Robert Woodward: I'd like to now turn it over to Robert Woodward to talk briefly about some of the important clinical evidence that was presented this week at the ISHL team meeting in Boston. Robert? Thank you. As John shared, this year marks the 45th annual meeting of the International Society of Heart and Lung Transplants. The Largest Scientific Conference for Cardiothoracic Transplants. CareDx products were featured in 60 apps. including 19 oral presentations and at least 2 ISHLT symposia in addition to our own CareDx. As you may know, it is common for researchers to present the findings from studies at the annual ISHLT meeting in advance of writing up a full manuscript and submitting the findings for publication.
Speaker Change: I'd like to now turn it over to Robert Woodward to talk briefly about some of the important clinical evidence that was presented this week at the iOS H L team meeting in Boston, Robert Thanks, Sean.
Robert Woodward: As John shared this year marks the 46th annual meeting of the International Society of heart and lung transplantation, the largest scientific conference for cardio thoracic transplant each year.
Robert Woodward: <unk> products were featured in 60 abstracts, including 19 oral presentations and at least two I S. H L. T. Symposia in addition to our own cardiac symposia.
Speaker Change: You May know it is common for researchers to present the findings from studies at the annual I S. H L. T meeting in advance of writing up a full manuscript and submitting the findings for publication.
Robert Woodward: Therefore, we view this large body of clinical abstracts as a strong sign of the future pipeline of journal publication. We support both the growing clinical adoption and the payer coverage of our products.
Speaker Change: Therefore, we view this large body of clinical abstracts as a strong sign of the future pipeline of journal publications to support both the growing clinical adoption and payer coverage of our products.
Robert Woodward: Now let's explore some of the most significant data in both hearts. I will start with heart care, which includes both LMAP gene expression profiling of immune and Alisher, donor-derived cell-free DNA assessment of New outcomes data from the SHORE study were showcased in five oral presentations out of a total of eight abstracts accepted by the conference from this one study. First, Dr. Nir Uriel, a Principal Investigator on the SHORE Study and Professor of Medicine and Director of Heart Failure and Heart Transplant Programs at New York-Presbyterian Columbia University and Weill Cornell Medicine in New York. One of the largest heart transplant programs in the U.S.
Speaker Change: Now, let's explore some of the most significant data in both heart and lungs.
Speaker Change: We'll start with heart care, which includes both Allomap gene expression profiling of immune activity and Alisher donor derived cell free DNA assessment of organ damage.
Speaker Change: New outcomes data from the shore study were showcased in five oral presentations out of a total of eight abstracts accepted by the conference from this one study.
Speaker Change: First Dr near your real a principal investigator on the shore study and professor of Medicine, and director of Heart failure and heart transplant programs at New York Presbyterian Columbia University, and Wild Cornell Medicine in New York, one of the largest heart transplant programs and programs in the U S presented in an oral abstract session session demonstrating.
Robert Woodward: Presented an oral abstract session at a session demonstrating that heart care may be more predictive of clinical outcomes. than the histopathological evaluation of biopsy. On slide seven, we provide some of These data show that a dual positive heart care result indicating elevation of both immune activity and indicating organ damage was prognostic for poor outcomes, a composite outcome of graft dysfunction, rejection, or death from heart disease. even when the associated pathology review of biopsy was negative. Nearly 25% of patients with dual positive heart care and a negative biopsy readout had poor outcomes by 18 months. patients with dual positive heart care and a negative pathology.
Speaker Change: Heart care, maybe more predictive of clinical outcomes than the hyster pathological evaluation of biopsy specimens.
Speaker Change: On slide seven we provide some of the data. These data show that a dual positive heart care result, indicating elevation of both immune activity and indicating organ damage was prognostic for poor outcomes, a composite outcome of graft dysfunction rejection or deaths from rejection, even when the associated pathology review of bio.
Speaker Change: She was negative.
Speaker Change: Nearly 25% of patients with dual positive heart care and a negative biopsy readout had poor outcomes by 18 months post transplant.
Speaker Change: These patients with dual positive heart care in a negative pathology review, where nearly 50% more likely to experience. These negative outcomes such as deaths from rejection than patients without a dual positive test.
Robert Woodward: were nearly 50% more likely to experience these negative outcomes, such as death from rejection, than patients without a dual positive. And importantly, heart care was prognostic of poor outcomes even when the pathology review of biopsy.
Speaker Change: Importantly, heart care was prognostic of poor outcomes, even when the pathology review of biopsy was negative.
Robert Woodward: These new data demonstrate that heart care may be a more important predictor of health outcomes in heart transplant patients than histology evaluation of a biopsy.
Speaker Change: These new data demonstrate that heart care, maybe more important and more important predictor of health outcomes in heart transplant patients that histology evaluation of a biopsy specimen.
Robert Woodward: Second, in a presentation delivered by Dr. Jeffrey Teutoberg, Principal Investigator on the Shore Study and a Professor of Medicine and Section Chief at Stanford. It was shown that overall outcomes at centers using heart care were not associated with the number of biopsies. This presentation, some of which is shown on slide 8, was really eye-opening for the attendees and was a result of an extensive analysis of biopsy practices across 43 of the largest participating shore transplants. The results indicated that these centers performed biopsies at varying ranging from less than one biopsy. nearly 10 biopsies every 10 months.
Speaker Change: Second in our presentation delivered by Dr. Jeffrey Tudor Berg principal investigator on the short study and a professor of Medicine and section Chief at Stanford University. It was shown that overall outcomes at centers using hard care were not associated with a number of biopsies performed at the center.
Speaker Change: This presentation some of which is shown on slide eight was really eye opening for the attendees and was a result of an extensive analysis of biopsy practice practices across 43 of the largest participating short transplant centers.
Speaker Change: The results indicated that these centers performed biopsies at varying frequencies ranging from less than one biopsy every 10 months to nearly 10 biopsies every 10 months in the first year.
Robert Woodward: Despite this variation, patient outcomes were not associated with the rate of biopsy. suggesting that the reducing biopsies in the context of using heart care has no negative impact on patients.
Speaker Change: Despite this variation patient outcomes were not associated with the rate of biopsy, suggesting that the reducing biopsies in the context of using heart care has no negative impact on patient outcomes.
Robert Woodward: Now turning to lung transplant. We continue to see increasing adoption of Alisher Lung. Our observation in working closely with the physicians caring for these highly vulnerable patients is that the longitudinal use of Alisher Lung is proving to be highly valuable.
Speaker Change: Now turning to lung transplantation, we continue to see increasing adoption of alisher long across the country, our observation and working closely with the physicians caring for these highly vulnerable patients is that the longitudinal use of alisher lung is proving to be highly valuable.
Robert Woodward: Dr. Sam White, Professor of Medicine and Director of Clinical Research for the Lung Transplant Program at UCLA, presented data from his institution during our CareDx Dr. White and his colleagues have focused on using personalized threshold for serial monitoring with Alisher to better identify rejections. By setting a personalized threshold based on a patient's Alisher Lung Longitudinal Results. demonstrated on slide. Sensitivity for Detecting Rejection Improved Over the Use of a Static Threshold Without an Impact The sensitivity improved from 50% to 75% in single lung. 46% to 85% in bilateral lung The approach by Dr. White may lead the way in surveillance use of elephants.
Speaker Change: Dr. Sam White Professor of Medicine, and director of clinical research for the lung transplant program at UCLA presented data from his institution during our cardiac symposium.
Speaker Change: Dr White and his colleagues have focused on using personalized threshold for serial monitoring with alisher to better identify rejection.
Speaker Change: By setting a personalized threshold based on Ah patients Alisher long longitudinal results overtime as demonstrated on slide nine the sensitivity for detecting rejection improved over the use of a static threshold without an impact on specificity.
Speaker Change: The sensitivity improved from 50% to 75% in single lung transplant patients and from 46% to 85% and bilateral lung transplant recipients the approached by Doctor White may lead the way and surveillance use of Alisher law.
Robert Woodward: These data complement those presented in a poster by the team at Tampa General Hospital, the institution with the largest number of total organ transplants in the United States. Their data, as described on slide 10, demonstrated similar utility for longitudinal assessment of allociation. They analyzed the ability of Alisher Lung to not only identify the onset of...
Speaker Change: These data complement those presented in a poster by the team at Tampa General Hospital, the institution with the largest number of total organ transplants in the United States last year.
Speaker Change: Their data as described on slide 10 demonstrated similar utility for longitudinal assessment of Alisher long.
Speaker Change: They analyze the ability of alisher long to not only identify the onset of rejection, but also monitor treatment following the rejection event there.
Robert Woodward: but also monitor treatment following the rejec- Their presentation showed a 50% increase of Alisher Lung from a prior test to the test in which rejection was identified, and a decrease back down to that same level following This year's ISHLT was the largest ever and was a remarkable event for We now look forward to the continued generation of outcome data and publications with these centers and the many others caring for transplant patients using CareDx.
Speaker Change: In their presentation showed a 50% increase of Alisher along from a prior test to the testing, which rejection was identified and a decrease back down to that same level of following treatment.
Speaker Change: This year's I S. H O T was the largest ever and was a remarkable event for <unk>.
Speaker Change: We now look forward to the continued generation of outcome data and publications with these centers and the many others carrying for transplant patients using cardiac testing solutions.
John Hanna: And I'll turn it back.
John Thank: Now I'll turn it back to John Thank.
John Hanna: Thank you, Robert. It has been an exciting meeting, and we're looking forward to seeing some of these data begin to turn into manuscripts over the coming year.
John Thank: Thank you Robert It has been an exciting meeting and we're looking forward to seeing some of these data begin to turn into menu scripts over the coming year.
John Hanna: Before moving on from testing services, there are two additional topics I want to cover. Our testing services pipeline development, and our efforts in operational excellence.
Speaker Change: Before moving on from testing services. There are two additional topics I want to cover our testing services pipeline development and our efforts in operational excellence.
John Hanna: First, this quarter, we presented data on our Alaheem assay for hematologic malignancies at the Tandem Cell Therapy and Cell Transplant Conference in Hawaii, and the EMBT, or European Bone Marrow Transplant Conference in Italy. This data included an interim one-year readout of the two-year ACROBAT trial to monitor for minimal residual disease recurrence in patients with hematologic malignancies that have undergone an allogeneic stem cell transplant. These interim data from a cohort of 229 patients and 11 stem cell transplant centers in the US demonstrate alloheme detects relapse, a clinically meaningful time ahead of standard of care approaches.
Speaker Change: First this quarter, we presented data on our Ala heme assay for hematologic malignancies at the tandem cell therapy and cell transplant conference in Hawaii.
Speaker Change: And the E M B T or your European bone marrow transplant conference in Italy.
Speaker Change: This data included an interim one year readout of the two year acrobat trial to monitor for minimal residual disease recurrence in patients with hematologic malignancies that have undergone an allogeneic stem cell transplant.
Speaker Change: These interim data from a cohort of 229 patients and 11 stem cell transplant centers in the U S demonstrate our heme detects relapse a clinically meaningful time ahead of standard of care approaches. These.
John Hanna: These data supporting Allaheem will build the foundation for our Medicare coverage submission following the completion of the Acrobat trial in 2026.
Speaker Change: These data supporting our heme will build the foundation for our Medicare coverage submission following the completion of the acrobat trial in 2026.
John Hanna: To place a greater emphasis on organic expansion and execution of our product pipeline, we have added Jen Foley as Chief Product Officer. Jen brings over 20 years of commercial and product experience from Genentech in the fields of immunology, oncology, cardiology, and neuroscience. In her role, Jen will lead our product strategy, early market shaping activities, and product development efforts to expand into hematology.
Speaker Change: To place a greater emphasis on organic expansion and execution of our product pipeline. We have added jenne Foley as chief product officer.
Speaker Change: <unk> brings over 20 years of commercial and product experience from Genentech in the fields of immunology oncology cardiology in neuroscience in her role Jen will lead our product strategy early market shaping activities and product development efforts to expand into hematology.
John Hanna: I look forward to providing further updates on our pipeline in future calls.
Speaker Change: Look forward to providing further updates on our pipeline in future calls.
John Hanna: Lastly, in operational excellence, we are continuing to improve our enterprise infrastructure and business processes to operate more efficiently, such that revenue growth continues to outpace operational expenses as we scale.
Speaker Change: Lastly in operational excellence, we are continuing to improve our enterprise infrastructure and business processes to operate more efficiently such that revenue growth continues to outpace operational expenses as we scale.
John Hanna: We are also announcing today that we have begun a significant initiative to integrate EPIC Aura. We entered into this program with EPIC, a leader in electronic health record software, to utilize EPIC Aura to make it easier for healthcare providers to order our testing services. It is our goal that by the end of the year, transplant centers using EPIC's platform will be able to order Alishore and Alimap seamlessly through EPIC Aura.
Speaker Change: We are also announcing today that we have begun a significant initiative to integrate epic Ora. We entered into this program with epic a leader in electronic health record software to utilize epic or to make it easier for health care providers to order our testing services. It is our goal that by the end of the year.
Speaker Change: Transplant centers using ethics platform, we'll be able to order al assure in allomap seamlessly through epic aura.
Speaker Change: [laughter].
John Hanna: Now moving on to our patient and digital solutions, which includes our transplant pharmacy, software tools, and remote patient monitoring services. We reported revenue of approximately 12 million in the first quarter, representing 24% year over year growth. Our go-to-market strategy is working, and we continue to see our patient and digital solutions unlocking growth opportunities for our testing services offerings. On lab products, which includes PCR kits for rapid deceased donor HLA typing and NGS kits for transplant recipient HLA typing globally, and IVD monitoring assays for solid organ and stem cell transplant recipients outside of the US, we reported revenue of $10.8 million, representing 26% year over year growth.
Speaker Change: Now moving onto our patient and digital solutions, which includes our transplant pharmacy software tools and remote patient monitoring services, we reported revenue of approximately 12 million in the first quarter, representing 24% year over year growth.
Speaker Change: Our go to market strategy is working and we continue to see our patient and digital solutions unlocking growth opportunities for our testing services offerings.
Speaker Change: Are on lab products, which includes PCR kits for rapid deceased donor HLA typing and Ngls kits for transplant recipient HLA typing globally.
Speaker Change: And I V D monitoring assays for solid organ and stem cell transplant recipients outside of the U S. We reported revenue of $10 8 million, representing 26% year over year over year growth sales of our industry, leading allo seek TX next generation HLA typing.
John Hanna: Sales of our industry-leading Alloseek TX Next Generation HLA Typing Kits for organ recipients continue to primarily drive this growth.
Speaker Change: Kids for Oregon recipients continue to primarily drive this growth.
John Hanna: In summary, we had a strong first quarter executing across all of our key drivers, including go-to-market strategy, evidence generation, and operational excellence.
Speaker Change: In summary, we had a strong first quarter executing across all of our key drivers, including go to market strategy evidence generation and operational excellence.
Abhishek Jain: And now, I'll turn it over to Abhishek to share more details on our first quarter financial results. Abhishek? Thank you, John. In my remarks today, I will discuss our first quarter financial results before reiterating our 2025 guidance. Unless otherwise noted, my remarks will focus on non-GAAP results. For further information, please refer to GAP to Non-GAP Reconciliations in our press release, earnings presentation and recent SEC filing.
Speaker Change: And now I'll turn it over to Abishag to share more details on our first quarter financial results Abishag.
Abishag: Thank you John in my remarks today, I will discuss our first quarter financial results before trading about 2025 guidance.
Abishag: Unless otherwise noted my remarks will focus on non-GAAP results for further information. Please refer to GAAP to non-GAAP reconciliations in our press release earnings presentation, and <unk> SEC filings.
Abhishek Jain: Let me start with the key financial highlights from the quarter. We reported total revenue of $84.7 million for the first quarter, up 18% year-over-year. We delivered approximately 47,100 test results in the first quarter, up 12% year-over-year. This performance reflects the seventh consecutive quarter of sequential testing services volume growth. Testing services revenue was 61.9 million up 15% year over year. Adjusted testing services revenue was $63 million, up 26% year-over-year on a comparable basis, excluding $1.1 million in write-off for aged receivables. Patient and Dental Solutions revenue was 12 million up 24% year over year and products revenue was 10.8 million up 26% year over year.
Abishag: Let me start with the key financial highlights from the quarter.
Abishag: We reported total revenue of $84 7 million for the first quarter up 18% year over year.
Abishag: We delivered approximately 47100 test results in the first quarter up 12% year over year. This performance reflects the seventh consecutive quarter of sequential testing services volume growth.
Abishag: Testing services revenue was $61 9 million up 15% year over year.
Abishag: Our adjusted testing services revenue was 63 million up 26% year over year on a comparable basis, excluding $1 1 million in write off on aged receivables.
Abishag: Patient in this our solutions revenue was 12 million up 24% year over year and product revenue was $10 8 million up 26% it'll be.
Abhishek Jain: We reported non-gap gross margin of 68.5% up 150 basis points year over year. We expanded our gross margin across all businesses. We reported an adjusted EBITDA gain of 4.6 million in the first quarter compared to an adjusted EBITDA loss of 1.9 million in the first quarter of 2024.
Abishag: We reported non-GAAP gross margin of 68, 5% up 150 basis points year over year, we expanded our gross margin across all businesses.
Abishag: We reported an adjusted EBITDA gain of $4 6 million in the first quarter compared to an adjusted EBITDA loss of $1 9 million in the first quarter of 'twenty 'twenty four.
Abhishek Jain: Finally, we ended the quarter with $231 million in cash, cash equivalents, and marketable securities, and no debt. Moving to the details, our non-gap testing services gross margin was 76.7% in the first quarter, compared to 76.1% in the same quarter a year ago. The improvement in testing services gross margin was primarily driven by ASP expansion. Our patient and distal solutions non-gap gross margin for the quarter was 38.6% as compared to 34.3% in the first quarter of 2014. Excluding our transplant pharmacy, which has a lower gross margin profile, our patient and distal solutions non-gap gross margin for the first quarter was 67% driven by a favorable mix of higher margin of Our products non-gap gross margin for the first quarter was 54.3% as compared to 46.4% in the first quarter of 24.
Abishag: Finally, we ended the quarter with 231 million in cash cash equivalents and marketable securities and no debt.
Abishag: Moving to the details our non-GAAP testing services gross margin was 76, 7% in the first quarter.
Abishag: Compared to 76, 1% in the same quarter a year ago.
Abishag: The improvement in testing services gross margin was primarily driven by ASP expansion.
Abishag: Outpatient and distance solutions non-GAAP gross margin for the quarter was 38, 6% as compared to 34, 3% in the first quarter of 'twenty four.
Abishag: Excluding our transplant pharmacy, which has a lower gross margin profile of patient and distance solutions non-GAAP gross margin for the first quarter was 67% driven by a favorable mix of higher margin offerings.
Abishag: Our products non-GAAP gross margin for the first quarter was 54, 3% as compared to 46, 4% in the first quarter of 'twenty four.
Abhishek Jain: Improvement in gross margin was driven by better pricing and improved absorption of our manufacturing expenses associated with volume growth. Following the administration's April 2nd tariff announcement, we see no material impact on our business today. We operate mostly in the U.S. and have limited import of products in the U.S. that we manufacture in Europe. We anticipate less than a million annual impact toward lab products cost of Moving down the P&L, non-GAAP operating expenses for the first quarter were $55.5 million, compared with $52.3 million in the same quarter last The increase in operating expenses was driven by the investments in sales and marketing to accelerate growth in line with our commercial go-to-market strategy.
Abishag: Improvement in gross margin was driven by better pricing and improved absorption of manufacturing expenses associated with volume growth.
Abishag: Following the administrations April 2nd that if announcement, we see no material impact on our business today.
Abishag: We all take mostly in the U S and have limited import of products in the U S that can be manufactured in Europe.
Abishag: We anticipate less than a million annual impact to our lab products cost of goods.
Abishag: Moving down the P&L non-GAAP operating expenses for the first quarter by $55 5 million compared with 50 to one 3 million in the same quarter last year.
Abishag: The increase in operating expenses was driven by the investments in sales and marketing to accelerate growth in line with our commercial go to market strategy.
Abhishek Jain: We continue to stay disciplined in managing our GNA and legal spend, which is down year over year. I would also like to note that we have taken steps to reduce stock based compensation expense as outlined in our 2025 proxy statement filed recently. We expect these actions, coupled with the expiration of agreements associated with former executives, will result in approximately 35 to 40% reduction in stock-based compensation expense for the full year 2025 over 2024.
Abishag: We continue to stay disciplined in managing our journey and legal spend which is down year over year.
Abishag: I would also like to note that we have taken steps to reduce stock based compensation expense as outlined in our 2025 proxy statement filed recently.
Abishag: We expect these actions coupled with the exploration of agreements associated with Goldman Executive will result in approximately 35% to 40% reduction in stock based compensation expense for the full year 2025 or 2024.
Abhishek Jain: We also have an update on the Securities Class Action litigation. Last week, the company reached an agreement in principle to resolve the matter for $20.25 million. We anticipate that the company's DNO insurers will cover approximately $14.9 million of the total, leaving the company with an out-of-pocket expense of approximately $5.4 million. We are now finalizing the definitive terms of the agreement, which will be subject to court approval. We look forward to putting this matter behind. We reported an adjusted EBITDA gain of $4.6 million in the first quarter, compared to an adjusted EBITDA loss of $1.9 million in the first quarter of 2014.
Abishag: We also have an update on the securities class action litigation.
Abishag: Last week the company reached an agreement in principle to resolve the matter for 22 5 million.
Abishag: We anticipate that the company's D&O insurers will cover approximately $14 9 million of the total leaving the company with out of pocket expense of approximately $5 4 million.
We are now finalizing the definitive thumbs of the agreement, which will be subject to court approval.
Abishag: We look forward to putting this matter behind us.
Abishag: We reported an adjusted EBITDA gain of $4 6 million in the first quarter compared to when they're just triggered by the loss of $1 9 million in the first quarter of 'twenty four.
Abhishek Jain: The improvement in adjusted EBITDA was driven by revenue growth and operational leverage, which contributed to better gross margins and improved non-gap operating expenses as a percent of revenue. Our adjusted EBITDA margin expanded almost 800 basis points year over year. Turning to our cash balance, we ended the quarter in a strong position with cash, cash equivalents and marketable securities of 231 million and no debt. up 15 million as compared to 216 million at the end of Q1 2024.
Abishag: The improvement in adjusted EBITDA was driven by revenue growth and operational leverage which contributed to better gross margins and improved non-GAAP operating expenses as a percent of revenue.
Abishag: I've just picked EBIDTA margin expanded almost 800 basis points year over year.
Abishag: Turning to our cash balance we ended the quarter in a strong position with cash cash equivalents and marketable securities of 231 million and no debt up.
Abishag: Up $15 million as compared to $216 million at the end of Q1 2024.
Abhishek Jain: In the first quarter, we pay annual bonuses to our employees. Cash used in operating activities of $26.6 million in Q1 was driven by a reduction in accrued compensation of $24 million, primarily associated with annual bonus payout. We expect to generate cash from operating activities during the rest of the year and on a full year basis.
Abishag: In the first quarter, we pay annual bonuses to our employees.
Abishag: Cash used in operating activities of $26 6 million in Q1 was driven by a reduction in accrued compensation of $24 million, primarily associated with annual bonus payout.
Abishag: We expect to generate cash from operating activities during the rest of the year and on a full year basis.
Abhishek Jain: Turning to guidance, we are reiterating our revenue guidance of $365 to $375 million in 2025. As we discussed in our last call, the midpoint of our 25 guidance assumes approximately 17% growth from our adjusted 24 revenue of $316 million. Our adjusted 24 revenue excludes the $17 million in revenue associated with tests performed in prior periods. Let me do a recap of the details on R25 Guidance. For testing services, we anticipate our test volumes to grow mid-teens year over year. We estimate our ASP to be approximately 1,360 attest on a blended basis for the full year.
Abishag: Turning to guidance, we are creating a revenue guidance of $365 million to $375 million in 2025.
Abishag: As we discussed in our last call. The midpoint of 525 guidance assumes approximately 17% growth from auto just take 24 revenue of $316 million.
Abishag: Although just take 24 revenue excludes the 17 million in revenue associated with test performed in prior periods.
Abishag: Let me do a recap of the details are not quantified guidance.
Abishag: For testing services, we anticipate our test volumes to grow mid teens year over year.
Abishag: We estimate an ESP to be approximately 30 860, <unk> passed on a blended basis for the full year.
Abhishek Jain: On testing volumes, sequential growth by quarter, we continue to expect 5% to 6% in the second quarter, 2% to 3% in the third quarter, and 5% to 6% in the fourth quarter of 2025. Also, this does not assume any changes to Medicare coverage. Our patient and digital solutions and lab products revenue is expected to grow in the mid-teens year over year. We expect our non-gap gross margin to be approximately 70% and operating expenses to be approximately $235 million for the full year 2025. We expect our adjusted EBITDA gain for the full year 2025 to be between $29 and $33 million.
Abishag: On testing volumes sequential growth by quarter, we continue to expect 5% to 6% in the second quarter totaled 3% in the third quarter and 5% to 6% in the fourth quarter of 2025.
Abishag: Also this does not assume any changes to Medicaid coverage.
Abishag: Outpatient and digital solutions and lab products revenue is expected to grow in the mid teens year over year.
Abishag: We expect our non-GAAP gross margin to be approximately 70% and operating expenses to be approximately $235 million for the full year 2025.
Abishag: We expect auto just trying to get a gain for the full year 25 to be between 29 and $33 million with that I would now turn the call over to John to deliver for closing remarks.
John Hanna: With that, I would now turn the call over to John to deliver closing remarks. Thank you Abhishek. In closing, I would like to thank all of the clinician partners that we have worked with leading up to this year's ISHLT meeting. At CareDx, we create life changing solutions that allow transplant patients to thrive. But it is only in partnership with the clinicians that manage the care of transplant patients every day, that we can achieve our vision of a world where every patient receives the transplant they need to live longer, fuller lives.
John Thank: Thank you Avishai in closing I would like to thank all of the clinician partners that we have worked with leading up to this year's I S. H L. T meeting at Coeur Dx, we create life changing solutions that allow transplant patients to thrive, but it is only in partnership with the clinicians that manage the care of transplant.
John Thank: Every day that we can achieve our vision of a world where every patient receives the transplant they need to live longer Fuller lives.
Operator: And now I'd like to ask the operator to open the line up to questions. Thank you. At this time, if you would like to ask a question, please press star one on your telephone. You may remove yourself from the queue at any time by pressing start.
John Thank: And now I'd like to ask the operator to open the line up to questions.
Speaker Change: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.
Operator: We ask that you limit your questions to one initial with one follow-up so we can take as many questions Once again, that is star one to ask a question.
Speaker Change: Ask that you limit your questions to one and a show with one follow up so we can take as many questions as possible.
Speaker Change: Once again that is star one to ask a question.
Mason Carrico: We'll go first to Matt Sykes with Goldman Sachs. Hey guys, this is Will on for Matt. Thanks for taking our questions.
Speaker Change: We will go first to Matt Sykes with Goldman Sachs.
Speaker Change: Hey, guys. This is will on for Matt Thanks for taking our questions.
John Hanna: Just starting higher level, you've talked about a gradual ramp in the return of surveillance volumes, was it taking two or three quarters to turn protocols back on? Did you see signs of that volume starting to come back in the quarter? And I guess more broadly, where are we at in that process? Thank you. Yeah, thanks for the question, Will. Absolutely, we are seeing signs of that volume coming back. We made progress on surveillance testing protocols in the fourth quarter and in the first quarter. And we see surveillance testing and kidney volumes really leading our growth across all organs.
Speaker Change: Just starting higher level, you've talked about a gradual ramp and the return of surveillance volumes was it taking two or three quarters to turn protocols back on did you see signs of that volume starting to come back in the quarter and I guess more broadly where are we at in that process. Thank you.
Speaker Change: Yes, thanks for the question well.
Speaker Change: Absolutely we are seeing signs of that volume coming back.
Speaker Change: We made progress on surveillance testing protocols in the fourth quarter and in the first quarter.
Speaker Change: And we see surveillance testing in kidney volumes really leading our growth across all organs.
Unknown Executive: Got it. That's super helpful. Thank you.
Speaker Change: Got it that's super helpful. Thank you and then I guess digging into the May.
Abhishek Jain: And then I guess digging into the, maybe the expenses for the quarter, R&D and SG&A were a little higher than we expected this quarter, but it sounds like a lot of that was compensation and investment and the sales and marketing team. How much of this is one time? And how should we be thinking about the rate of spend throughout the rest of the year? Yeah, the operating expenses, we have been keeping a very tight watch there. Well, when I look at the operating expenses, they were up like 6% year over year. When you compare it with our revenue growth of 18%, that is actually providing us about 600 to 700 basis points improvements of the operating expenses as a percent of revenue.
Speaker Change: Maybe the expenses for the quarter R&D and SG&A were a little higher than we expected this quarter, but it sounds like a lot of that was compensation and investment in the sales and marketing team.
Speaker Change: Much of this is one time and how should we be thinking about the rate of spend throughout the rest of the year.
Speaker Change: Yes, the operating expenses, we have been keeping a very tight wash there, but when I look at the operating expenses they were up like 6% year over year, when you compared it without revenue growth of 18% that is actually providing us about 600 to 700 basis points improvement off the.
Speaker Change: Operating expenses as a percent of revenue.
Unknown Executive: Now, if you were to break it down between the three components, the R&D, S&M, and G&A, our G&A expenses actually year-over-year is down on a non-gap basis, and you will see that the increase is primarily driven by the S&F, which is basically in line with our strategy where we have been investing in S&M to accelerate our growth. R&D expenses, I see that they are pretty flattish at about $17 million on a non-gap. That's helpful. Thanks so much, guys.
Speaker Change: If you were to break it down between the two companies the Aten B S N M and G&A, our G&A expenses actually year over year is down on a non-GAAP basis, and you will see that the increase is primarily driven by the S. N that which is basically in line with our strategy. We have been investing in S. N M to accelerate our growth.
Speaker Change: R&D expenses I see that they are pretty flattish you had about $17 million on a non-GAAP basis.
Speaker Change: That's helpful. Thanks, so much guys.
Mason Carrico: We'll go next to Mason Carrico with Steve. Hey guys, thanks for the questions here. Maybe to start, any additional color you're willing to share around surveillance volumes and the progress you've made on protocols? It looks like you called out that you expected to have an impact in Q2. I know that's kind of on track. I think you guys may have been emphasizing back half more last quarter. So am I interpreting that right?
Nathan: We'll go next to Nathan <unk> with Stephens.
Nathan: Hey, guys. Thanks.
Nathan: Thanks for the questions here so.
Nathan: Maybe to start.
Nathan: Any additional color you are willing to share around surveillance volumes and the progress you've made on protocols and it looks like you called out that you expected to have an impact in Q2.
Nathan: I know that's kind of on track I think you guys may have been emphasizing back half more last quarter. So in interpreting that right is the benefit getting pulled forward a little bit or just any additional color around that comment.
John Hanna: Is the benefit getting pulled forward a little bit or just any additional color around that comment?
John Hanna: Hey, Mason, thanks so much for the question for joining the call. Yeah, I don't think that we're suggesting pull forward. As you know, in last quarter's call, we, we signaled that we had anticipated some impact from weather and fires at the beginning of the quarter. And so we're just here emphasizing that we are making progress on surveillance testing. But given the slightly more muted q1 volume, we're anticipating to see that that growth in q2, the centers have been responding very positively to the reinitiation of surveillance. And as I've been saying, we anticipate that as centers start on protocol, again, they are going to initiate newly transplanted patients on those protocols, and that we'd see a gradual increase in the volume as they transplant patients, you know, month over month.
Nathan: Hey, Jason Thanks, so much for the question for joining the call. Yes, I don't think that we're suggesting pull forward as you know in last quarter's call. We we signaled that we had anticipated some impact from weather and fires at the beginning of the quarter and so we're just here emphasizing that we are making progress.
Nathan: On surveillance testing, but.
Speaker Change: But given the slightly more muted Q1 volume were anticipating to see that that growth in Q2.
Speaker Change: The centers have been responding very positively to the re initiation of surveillance and as I've been saying, we anticipate that adds centers a start on protocol again, they are going to initiate newly transplanted patients on those protocols and that we'd see a gradual.
Speaker Change: The increase in the volume as they transplant patients a month over month and that that has been playing out that's what we're seeing in the field and in our numbers and so I'm very pleased with the progress that we're making thus far.
Unknown Executive: And that that has been playing out. That's what we're seeing in the field and in our numbers. And so I'm very pleased with the progress that we're making thus far. And, you know, think we're right on right on pace with what we've guided for the year. Got it, okay.
Speaker Change: And I think we're right on right on pace with what we've guided for the year.
Speaker Change: Got it okay, and and John it'd be great to hear your latest thoughts around the Max potentially issuing new LCD for transplant testing I mean, how are you thinking about the potential timing there the impact I mean do you guys feel like you're in a much better position now if that were to play out given the amount of data that you guys had published over.
John Hanna: And John, it'd be great to hear your latest thoughts around the MACS potentially issuing new LCDs for transplant testing. I mean, how are you thinking about the potential timing there, the impact? I mean, do you guys feel like you're in a much better position now if that were to play out given the amount of data that you guys have published over the last few years? Absolutely, Mason, I think that the data has really grown in terms of the body of evidence supporting the benefit of surveillance testing in kidney. We, you know, had seen the agency put out their press release in August that the MACS may be issuing a new LCD to update that literature review, and have that LCD become current with where the market is today.
Speaker Change: The last few years.
Speaker Change: Absolutely Nathan I think that the data has.
Speaker Change: Really grown in terms of the body of evidence supporting the benefit of surveillance testing in kidney, we you know.
Speaker Change: <unk> seen the agency put out their press release in August that the Max may be issuing a new LCD to update that literature review and have that LCD become current with where the market is today, but.
Unknown Executive: But we don't have any more indication as to the timing of that. We've continued to push forward with the CAOR study, for example, and submitted that manuscript back in the fourth quarter. And we're looking forward to seeing that in print. And that should certainly contribute to solidifying the position that surveillance testing should be covered for these kidney transplant patients. Got it. Okay.
Speaker Change: But we don't have any more indication as to the timing of that we've continued to push forward with the K Oar study for example, and submitted that manuscript back in the fourth quarter and we're looking forward to seeing that in print and that should certainly contribute to solidifying the position that survey.
Speaker Change: Islands testing should be covered for these kidney transplant patients.
Unknown Executive: Thank you.
Speaker Change: Got it okay. Thank you.
Tycho Peterson: We'll move next to Tycho Peterson with Jeff. Thanks, Madhav from Tyco. Maybe first one, congrats on the EPIC launch. I think you had previously kind of talked about maybe launching that mid-year, so is that a bit sooner than you had initially thought? And then are there any kind of one-time step-up in cost associated with the rollout of EPIC?
Tycho Peterson: We'll move next to Tycho Peterson with Jefferies.
Speaker Change: Hey, Thanks, Matt upfront Tycho, maybe first one congrats.
Tycho Peterson: Congrats on the epic launch.
Speaker Change: I think you had previously kind of talked about maybe launching that mid year. So is that a bit sooner than you had initially thought and then there are any.
Speaker Change: Kind of a onetime step up in costs associated with the rollout of epic and then John on the other side of that rollout, which sounds like it could be by the end of the year can you just talk about kind of the friction removed for those centers and what you could theoretically see expect to see from a volume impact on the other side once fully rolled out. Thank you.
Keith: And then just, John, on the other side of that rollout, which sounds like it could be by the end of the year, can you just talk about kind of the friction removed for those centers and what, you know, you could theoretically expect to see from a volume impact on the other side once fully rolled out? Thank you. Yeah, thanks for joining, Matt.
Keith: I'm gonna ask Keith to take that one. Great. We're really excited about EPIC. We have 20 people up there right now for their user conference, which is going really well. I think we're one of the largest attendees.
Speaker Change: Yes, thanks for joining Matt I'm going to ask Keith to take that one great. We're really excited about ethic. We have 20 people out there right now for their user conference, which has gone really well I think we're one of the largest attendees kind of thing.
Keith: thing. I got some pictures that they had our name up there on the big screen. So that was really exciting. We've been talking about this with customers here at the conference. So they're very excited about that.
Speaker Change: Got some pictures that they had our name out there on the big screen sounds really exciting.
Speaker Change: What about this with customers here at the conference. So they are very excited about that we took over the epic environment. In early April we will have that fully.
Keith: We took over the Epic environment in early April, we will have that fully launched and essentially the setup that we will deploy with customers by the end of the second quarter. And then we will starting July 1st work on the first pilot launches. So you select a customers that will work with you to launch this, work out the kinks, and then you go out and you broadly launch that, which we will do starting in the fourth quarter. And people are very, very excited about that.
Speaker Change: Launched and essentially the setup that we will deploy with customers by the end of the second quarter and then we will starting July 1st work on the first pilot launches. So you select a group of customers that will work with you to launch this work out the Kinks.
When you go out and you broadly launch that which we wont do starting in the fourth quarter and people are very very excited about that we have a couple of tricks up our sleeves, we're not going to disclose right now, but we're working on a couple of other things to really.
Keith: We have a couple tricks up our sleeves, we're not going to disclose right now, but we're working on a couple other things to really make this impactful so that we're building our way in the 26 and 27 with clients. I think generally the response is really good. I think where Epic told us we're a couple months ahead of anybody else has ever done this. So we're really working hard at it. It's good to hear. Okay, great, thanks.
Speaker Change: This impactful so they were building our way into 'twenty six 'twenty seven with clients.
Speaker Change: Generally the response is really good I think were epic told us for a couple of months ahead of anybody else as ever.
Speaker Change: <unk> done that so we're really working hard at it.
Speaker Change: Good to hear and then maybe.
Speaker Change: Just so you know this is about a $5 million investment every year for any diagnostics company and then they have you know.
Speaker Change: On a per click per test fee that gets added in there but in the end I think <unk> would make the argument and everybody else make the argument that over time just pays for itself.
Tycho Peterson: And then, John, I appreciate the color just in terms of the two new product launches and the opportunity in terms of existing volumes for each one of those. Can you just kind of help us better understand, you know, a realistic penetration for both of those and call it year one in 2025? I mean, is it a few percentage points to what you talked about? I mean, or could it be something more meaningful, kind of in the double digits?
John Thank: Okay, great. Thanks, and then John I appreciate the color just in terms of the two new product launches and the opportunity in terms of existing volumes for each one of those can you just kind of help us better understand a realistic penetration for for both of those you can call at year, one and 2025, I mean is it a few percentage points to what.
John Thank: You talked about or could it be something more meaningful kind of in the double digits. How do we think about the launches into the two kind of indications you described and what realistic penetration could be in the call. It near term in 2025. Thank you.
John Hanna: How do we think about the launches into the two kind of indications you described and what realistic penetration could be in the call it near term in 2025? Thank you. Yeah, thanks so much for the question. And for joining. I think realistically, penetration could be relatively high in those two indications. You know, as I shared, you know, the total volume of procedures is not huge, but they are significant procedures and ones where, you know, the clinical scenario is just slightly different from the core adult solid organ transplant validation of the testing. And so we felt like it was really important, given the increasing volume in simultaneous pancreas, kidney, and the really, really significant medical need in adolescent heart transplant, to get the products validated for those indications so that we can deliver to those clinicians a validated report and give them confidence in using the testing for those populations.
John Thank: Yeah. Thanks, Thanks, so much for the question.
John Thank: And for joining I think realistically penetration could be relatively high in those two indications you know as I shared the total volume of procedures is not huge but they are significant procedures and ones where the.
John Thank: The clinical scenario is just slightly different from the core adult solid organ transplant, a validation of the testing and so we felt like it was really important given the increasing volume and simultaneous pancreas kidney and a really really significant medical need.
John Thank: Need in adolescent heart transplant to get the products validated for those indications. So that we can deliver to those clinicians are validated report and give them confidence in using the testing for those populations.
Vivian: We'll move next to Mark Massaro with BTIG. Hi, this is Vivian. I'm from MARC. Thanks for taking the questions. So I think in the past, you've discussed improvements in billing and collections as a key lever in driving ASPs. I know you touched on EPIC or integration earlier. Is there just anything else around, you know, maybe Salesforce incentivization or just any other variables to call out that could further drive ASPs here? Yeah, thanks, Vivian. I'll let I'll let Keith talk to that.
John Thank: Okay.
Speaker Change: We'll move next to Mark Massaro with BTG.
Speaker Change: Yes, Hi, this is <unk> on for Mark Thanks for taking the questions.
Speaker Change: So I think in the past you've discussed improvements in billing and collections as a key lever in driving his piece I know you touched on epic.
Keith: Earlier, and I think if anything else around you know maybe sales force incentivize Asian or just any other available to call out that could further drive it's Keith here.
Speaker Change: Yeah, Thanks, Vivien I'll, let I'll, let Keith talk to that.
Keith: Hey, Vivian, it's Keith. As you know, we just made a large investment in the leadership team and the revenue cycle management team, as well as the rest of the staff. We just came off a really productive offsite. We're reengineering all the workflows associated with revenue cycle management. And so that's, that's been very productive, and I expect long term benefits of that. So we made the decision to focus in on the near term getting the claims filed clean claims, doing eligibility verification on 100% of our patients, improving our authorization success rate, and establishing an appeals team and process to dramatically drive ASP.
Speaker Change: It's Keith as you know, we just made a large investment in our leadership team in the revenue cycle management team and as well as the rest of his staff. We just came off a really productive off site.
Speaker Change: Reengineering, all the workflows associated with revenue cycle management.
Speaker Change: That's been very productive and I expect long term benefits of that so we made the decision to focus in on the near term getting the claims.
Speaker Change: File clean claims doing eligibility verification on 100% of our patients improving our authorization success rate.
Speaker Change: And establishing an appeals team and processor dramatically drive Asps I think these improvements will take effect over six to eight quarters. So you're not going to just turn on a workflow.
Keith: I think the Improvements will take effect over, you know, six, eight quarters. So you're not going to just turn on a workflow and, you know, 10 days later, there's a major impact. But I think what we're trying to do is drive significant increase. And the way to do that is to get those claims in on time and clean claims. And then I would turn to the market access side. And on that, I'd say we're focusing on the coverage and contracting with key payers. including the VA as well as the Medicaid states, driving, second would be driving payer adoption using our OUSH or PLA code that John referenced.
Speaker Change: 10 days later, there's a major impact, but I think what we're trying to do is drive significant increase in a way to do that is to get those claims and on time and clean claims and then I would turn to the market access side and on that I'd say, we're focusing on the coverage and contracting with key payers.
Speaker Change: Including the VA as well as Medicaid States.
Speaker Change: <unk> second would be driving payer adoption using our hour show or <unk>.
John Thank: John referenced.
Keith: Third would be systematically reducing the number of required prior authorizations. So as you know, on Medicare Advantage, they can require prior authorizations. It's really important that you manage that process. And then the fourth is what Robert talked about is using newly published clinical data to drive medical policy reviews and guideline updates. That'd be my summary of how to address that.
John Thank: Third <unk> systematically reducing the number of required prior authorizations. So as you know on Medicare advantage. He can require prior authorizations, it's really important that you manage that process and then the fourth was what Robert talked about is using newly published clinical data to drive medical policy reviews and guideline updates.
John Thank: Yeah.
Speaker Change: That'd be my CFO.
John Thank: I did not address that Vivian.
Vivian: Yeah, that was great color. Thanks so much.
John Thank: Yeah, that's great color. Thanks, so much and then I just have two quick cleanup from the model just the first one was that other lassner space called out severe weather impacts.
Abhishek Jain: And then I just had two quick cleanups on the model. Just the first one was other labs in our space have called out severe weather impacts. I don't think I heard anything on that front. And then just the second part was prior period collections of the quarter. If you could touch on those 2. So on the first one, where we talk about the impact of the weather on our testing services volumes for the Q1, we believe that it impacted about 500 to 600 tests for the quarter or about a per point of the growth there.
John Thank: I think I heard anything on that front.
John Thank: And then just the second part was prior period collections in the quarter, if you could touch on those two.
John Thank: So on the first one maybe talk about the impact of weather on our testing services volumes for the Q1.
John Thank: B, we believe that it impacted about 500 to 600 tests for the quarter or about a book point of the growth there.
Abhishek Jain: And on the second question regarding the collection adjustments, we have called out $1.1 million that we basically take as a write-off due to the ACE receivables. So probably you, and that's what I've called out in the adjusted revenue for the testing services, where the revenue for testing services was $63 million on an adjusted revenue. And I'd point out that is, that is over probably, you know, three to four quarters of revenue. So you're talking over a $1.1 million adjustment on over $300 million. Yeah, so it's a minor, it's essentially a minor cleanup of the ARs.
John Thank: And on your second question regarding the collection of just months.
John Thank: We have called out one $1 million.
John Thank: That would be basically take as a write off due to the east receivables. So probably you and that's what I've called out in the adjusted revenue for the testing services.
John Thank: The revenue for testing services was $63 million on an adjusted basis.
John Thank: And I'd point out.
Speaker Change: That is over probably three to four quarters of revenues Youre talking over one.
Speaker Change: One 1 billion dollar adjustment on over $300 million in revenue yeah. So I'd say, it's a minor it's essentially a minor cleanup of a ars way I would describe that.
Unknown Executive: Okay, great. Thanks so much for taking the questions, guys.
Speaker Change: Yeah.
Speaker Change: Okay, great. Thanks, so much for taking the questions guys.
Brandon Couillard: Thank you. We'll go next to Brandon Couillard with Wells Fargo. Hey, thanks. Good afternoon. John, the UNOS procedure data is pretty muted year to date, kind of only upload singles. What's embedded in the guidance as far as kind of overall procedure volumes? And does that need to pick up for you to hit the high end of the range? Hey, thanks, Brandon, appreciate the question. We feel like we're on track with our guidance. Our business, as I said in the prepared remarks, performed really strong in February and March, and that continued into April.
Speaker Change: Thank you. Thank you.
Speaker Change: We'll go next to Brandon <unk> with Wells Fargo.
Brandon: Hey, Thanks, good afternoon.
Speaker Change: Jonathan.
Speaker Change: <unk>.
Speaker Change: Procedure data is pretty muted year to date kind of only up low singles whats embedded in the guidance as far as kind of overall procedure volumes and does that need to pick up for you to hit the high end of the range.
Speaker Change: Hey, Thanks, Brandon I appreciate the question, we feel like we're on track with our guidance our business as I said in the prepared remarks performed really strong in February and March and that continued into April despite the.
John Hanna: Despite the, you know, softer start to the year on transplant procedures, as you pointed out in the in the UNOS data, you know, we also believe that there's the potential to see, you know, a significant uptick in procedures in the second half of the year as the IOTA program initiates July 1, 2025. So we provided in our long range guide an expectation of 5% overall growth of the market on a compounded annual basis, which is consistent with historic trends. And that that number tends to go up and down, you know, every year by a hundred basis points.
Speaker Change: Softer start to the year on transplant procedures as you pointed out in the in the universe data. We also believe that there's the potential to see.
Speaker Change: Significant uptick in procedures in the second half of the year as the I O T. A program initiated.
Speaker Change: July one 2025, so we provided in our long range guide an expectation of 5% overall.
Speaker Change: The overall growth of the market on a compounded annual basis, which is consistent with historic trends and that that number tends to go up and down you know every year by a couple of hundred basis points and so so we feel like we're still in a great position on the guide.
John Hanna: And so, so we feel like we're still in a great position on the guide.
John Hanna: And we're not really concerned about the transplant volumes right now.
Speaker Change: We're not really concerned about the the transplant volumes right now.
John Hanna: Okay, then on the new CPP code, John or AJ, if you just walk through the impact of that and how it leads to greater in network coverage, and I guess, ultimately, a higher ASP protest. Yeah, that's a great question. You know, typically, just because you have a code doesn't doesn't mean you get paid more. But in our case, because we have substantial evidence supporting Alishore, and we have been gaining private payer coverage over the past several years, what we've seen is that the absence of having a test specific code has inhibited our ability to get payer contracts and get in network for that service.
Speaker Change: Okay, and then on the new CPT code, John or Jay could you just walk through the impact of that and how it leads to greater in networks coverage and I guess ultimately a higher ASP protests.
Speaker Change: Yeah, that's a great question.
Speaker Change: You know typically just because you have a code doesn't doesn't mean, you get paid more but in our case, because we have substantial evidence supporting Alice sure and we have been gaining private payer coverage over the past several years.
Speaker Change: What we've seen is that the absence of having a test specific code has inhibited our ability to get payor contracts and get in network for that service and so we decided to pursue the alisher specific code, which we can use for.
John Hanna: And so we decided to pursue the Alishore specific code, which we can use for heart, kidney and lung because it's agnostic to organ to contract with third party payers, like the Blue Cross plan that I described in the prepared remarks, and get in the network, which allows us to get paid on a first pass claim. And get paid that contracted rate versus the claim being denied, because we're billing and unlisted code and then go through the whole appeal process. And it takes, you know, many, many, many months to collect the cash. So we're, we're really optimistic about the impact the code can have, given that we think we can convert some of these coverage policies into contracts here in the near term.
Speaker Change: Or heart kidney and lung because its agnostic to Oregon.
Speaker Change: To contract with third party payers like the Blue Cross plan that I described in the prepared remarks and get into network, which allows us to get paid on a first pass claim.
Speaker Change: And get paid that contracted rate versus the claims being denied because we're billing and unlisted code and then go through the whole appeal process and it takes many many many months to collect the cash. So we're really optimistic about the impact of the code can had given that we think we can convert some of these coverage policy.
Speaker Change: CS into contracts here in the near term.
Thomas DeBourcy: Thank you. We'll move to Thomas DeBourcy with Nefron Research. guys.
Speaker Change: Okay. Thank you.
Thomas: Well move to Thomas <unk> with Nephron research.
John Hanna: Just first question was on transplant pharmacy, you mentioned, seeing an incremental benefit from transplant, the transplant pharmacy on testing services revenue, just where to get more color in terms of, you know, how you're seeing that play out in practice with patients. Thanks, Thomas. It's great to hear from you. Thanks for joining the call.
Speaker Change: These guys.
Thomas: Just first question was.
Speaker Change: Transplant pharmacy, you mentioned <unk>.
Speaker Change: Seeing an incremental benefit from transplant.
Speaker Change: The transplant pharmacy on testing services revenue just wanted to get some more color in terms of.
Speaker Change: How youre seeing that play out in practice with patients.
Speaker Change: Thanks, Thomas it's great to hear from you and thanks for joining the call.
Speaker Change: I think the way to think about that is you know.
John Hanna: I think I think the way to think about that is, you know, as we laid out in our Investor Day last October, we believe that the synergy between our patient and digital solutions, and our testing services business is very strong. And as we sell solutions into the transplant centers, such as our software products, our pharmacy offering, it gives us the opportunity to unlock more growth in our testing services business, whether that be capturing more patients that are transplanted on the center onto a testing protocol, or ensuring those patients for which testing services is ordered on the protocol that they adhere to that protocol.
Speaker Change: As we laid out in our.
Speaker Change: Investor Day last October we believe that the synergy between our patient and digital solutions and our testing services business is very strong.
Speaker Change: And as we sell solutions into the transplant centers, such as our software products, our pharmacy offering it gives us the opportunity to unlock more growth in our testing services business, whether that be capturing more patients that are transplanted on the.
Speaker Change: Center onto a testing protocol or ensuring those patients for which testing services has ordered on the protocol that they adhere to that protocol and so we're seeing that our patient and digital solutions, it's not that it's giving a revenue benefit it's really good.
John Hanna: And so we're seeing that our patient and digital solutions, it's not that it's giving a revenue benefit, it's really giving us greater access and deeper engagement with the customers to help convert into more, for example, Alishore kidney protocol adoption across these centers. Understood.
Speaker Change: Giving us greater access and deeper engagement with the customers to help convert into more for example, our shore kidney protocol adoption across these centers.
John Hanna: And just as a follow up on the IOTA program, you'd mentioned last quarter, software to automatically, I guess, track quality scores for transplant centers. And I was just curious the feedback that you're getting from centers, that solution. Yeah, we're getting a lot of positive feedback on that. Thanks for the question. We've been on a bit of a roadshow talking with the centers that have been selected for the IOTA program, because that's a public list. And our team that manages our quality reporting software tool has been going center to center having discussions with them about preparation for the initiation of the program, and the enhancements that we're making to the software that enable them to report.
Speaker Change: Understood and just as a follow up.
Speaker Change: On the Iota program you'd mentioned last quarter.
Speaker Change: Software to automatically.
Speaker Change: Track quality scores for transplant centers.
Speaker Change: I was just curious the feedback that you're getting from centers that solution.
Speaker Change: Yeah, we're getting a lot of positive feedback on that thanks for the question we've been on a bit of a road show talking with the centers that have been selected for the Iot Ta program, because that's a public list.
Speaker Change: Our team that manages our quality reporting software tool has been going center to center, having discussions with them about preparation for the initiation of the program and the enhancements that we're making to the software that enable them to report the reporting process for Iot.
Operator: The reporting process for IOTA is on an annual basis. So they don't have to start reporting on July 1 2025. In fact, they won't have to report until June 26. So really, for us right now, it's education on the capability set that that software tool is going to have, so that it enables them to track their progress throughout that first year cycle, and then be prepared to report when that first year cycle ends. Great, thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad now.
Speaker Change: <unk> is on an annual basis. So they don't have to start reporting on July one 2025 in fact, they won't have to report until June 26.
Speaker Change: So really for US right now it's education on the capability set that that software tool is going to have said that enables them to track their progress throughout that first year cycle and then be prepared to report when that first year cycle ends.
Speaker Change: Great. Thank you.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad now we will go next to you Chen with H C. Wainwright.
Eduardo: We will go next to Yi Chen with HC Wainwright. Hi, this is Eduardo on for Yi. Just a quick question about competitive developments in the space, specifically Onca site and Vitagraph, their recent announcement for Medicare expansion. Do you envision that having impact, any effect on your guys guidance? Or do you guys consider your technology to be kind of far better and superior?
Speaker Change: Hi, This is Eduardo on for you just a quick question about kind of the competitive developments in this space specifically Yonkers cited by the graph in their recent announcement for Medicare expansion do you envision that having impact any effect on your guys' guidance or do you guys consider your technology.
Speaker Change: That's far better than superior.
John Hanna: Hi, Eduardo, thanks for joining the call. I think I think I read the Onco site announcement this morning stating that they were going to initiate a study to try to get approval for their product, but that it's several years away. So I don't I don't anticipate that having any impact on our guidance. And, you know, quite frankly, as you know, we're the we're the market leader in this segment in transplant. And we've been in this market for nearly 25 years, so more than half of the life of the ISHLT program, CareDx has been participating in this in this conference and with this community.
Speaker Change: Hi, Eduardo Thanks for joining the call.
Speaker Change: <unk>.
Speaker Change: I think I think I read the Arco site announcement. This morning, stating that they were going to initiate a study to try to get approval for their product, but it's several years away. So I don't I don't anticipate that having any impact on our guidance.
Speaker Change: And quite frankly, as you know where the where the market leader in this segment in transplant and we've been in this market for nearly 25 years, so more than half of the life of the ISI <unk> program <unk> has been participating in this in this conference and with this community and while I think.
Eduardo: And while I think, you know, competition is always good for patients and for clinicians in the market and for innovation, I don't I don't see one one entity like Onco site really having an impact on how we guide the year. Okay, yeah, I mean, I was familiar with the graph for sure, which is the digital PCR, that one's still in development. I was, the Phytograph that I understand, had regulatory approval, and they were looking to get Medicare expansion. Yeah, it's not something I'm familiar with, Eduardo, but we'll look into it. All right. Thank you.
Speaker Change: Petition is always good for patients and for clinicians in the market and for innovation.
Speaker Change: I don't see.
Speaker Change: One one entity like Unco site.
Speaker Change: Really having an impact on how we guide the year.
Speaker Change: Okay, Yeah, I mean, I was familiar with the graph for sure which is the digital PCR that one's still in development I was that photograph to understand had.
Speaker Change: Sawyer approval and they were looking to get Medicare expansion.
Speaker Change: Yeah.
Speaker Change: Yes, it's not something I'm familiar with Eduardo, but we'll look into it.
Speaker Change: Alright, thank you.
Speaker Change: Yeah.
Operator: With no further questions at this time, that will conclude today's CareDx first quarter 2025 earnings conference call. We would like to thank you all for your participation. You may disconnect at any time.
Speaker Change: With no further questions at this time that will conclude todays <unk> first quarter 2025 earnings conference call. We would like to thank you all for your participation you may disconnect at any time.
Speaker Change: Hmm.
[music].
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: [music].