Biodesix, Inc.

Good day and thank you for standing by. Welcome to the Biodesic's fourth quarter 2023 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chris Brinze, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us today for a discussion of Biodesic's fourth quarter and year-ended 2023 business highlights and financial results. Leading the call today will be Scott Hutton, Chief Executive Officer. He will be joined by Robin Harper-Cowie, Chief Financial Officer. After the prepared remarks, we will open the call for Q&A. An audio recording and webcast replay for today's conference call will also be available online as detailed in the press release announcement for this call. Today, we issued a press release announcing our business highlights and financial results for the fourth quarter and year-ended 2023. A copy of the release can be found on the investor relations page of the company's website. Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand, and the competitive nature of the diagnostics industry. Such forward-looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the company's annual report on Form 10-K for the year ended December 31, 2023, which was filed today with the Securities and Exchange Commission. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's press release issued today and in the company's filings with the SEC. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation to the most directly comparable GAAP financial measure is available in the press release we issued today. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris. Happy to share that 2023 was a great year of execution at Biodesics. We've been focused on three goals. driving increased revenue through the adoption of our lung diagnostic test and our biopharma and diagnostic services, implementing operational efficiencies to improve gross margins, and maintaining a strict cost discipline. In 2023, we delivered approximately 38,700 lung diagnostic tests, which represents 65% growth over 2022. We increased our gross margins over the course of the year to 77%, and we improved our fourth quarter adjusted EBITDA by 55% over the comparable period. Our team and culture have never been stronger, and you see that strength reflected in our results. I want to express my sincere gratitude to our team for their hard work and dedication to improving the lives of patients and the healthcare professionals that serve them. Our top priority remains the ongoing adoption of our five blood-based tests for patients with potentially cancerous lung nodules and those with lung cancer. This past quarter, we delivered approximately 10,900 test results, reflecting growth of 54% as compared to the approximately 7,100 test results delivered in the fourth quarter of 2022. This is the sixth straight quarter of at least 50% year-over-year growth. primarily driven by our Notify CDT and XL2 lung testing volumes. Lung nodule management is by far the largest market we serve and will continue to be the largest driver of lung diagnostic test volume growth. Our industry-leading commercial team was responsible for driving this outstanding growth in 2023. We continued to invest and expand our organization throughout the year, finishing with approximately 50 fully trained representatives, with an additional 10 that came on board late in quarter four. On average, our sales representatives begin paying for themselves within two to three months. Therefore, we expect these new teammates to begin contributing in the first quarter of 2024. We also validated the benefit of adding associate sales consultants into existing territories, working alongside established team members to improve account retention and penetration while building a bench for future expansion. As a result, 2024 will see an ongoing expansion that includes splitting existing territories into more manageable geographies as the business grows, with an increase in the number of territories holding both a sales consultant and an associate sales consultant that will accelerate adoption within those territories. In the second half of 2023, the publication of the primary endpoint for the Oracle Prospective Registry Study was published. The data showed that use of the Notify XL2 test resulted in a 74% reduction in costly and unnecessary biopsies and or surgeries on patients with benign lung nodules. In addition to this data, an independent group of academic medical centers published a 73% reduction in unnecessary procedures, clearly demonstrating the clinical utility of Notify in the real-world clinical setting. Peer-reviewed publications such as these are critical to help expand physician adoption of our test, as well as expanding payer coverage. In addition to the growth in volumes driven by our sales team, broadening reimbursement coverage remains an important part of our growth strategy. In July, the Notify CDT test was awarded Advanced Diagnostic Laboratory Test, or ADLT, status by the Center for Medicare and Medicaid Services. Receiving ADLT status is a major milestone for the bioethics team, as this is reserved for innovative tests with Medicare coverage that provide clinical value and new diagnostic information that cannot be obtained from any other test or combination of tests. The ADLT status is a public recognition of unique clinical utility. Notify CDT joins Notify XL2 and Veristrat in having received that important classification. In late fourth quarter, Geisinger Health Plan issued a positive coverage decision for Notify Lung Testing, including both the Notify CDT and Notify XL2 blood-based proteomic test. Geisinger Health Plan was the first commercial plan to cover Notify CDT. The combined coverage of both Notify CDT and Notify XL2 testing recognizes the importance of these tests in assisting healthcare professionals in lung nodule management to help improve patient outcomes. Moving on to our biopharmaceutical services business, we generated exceptional momentum in the second half of the year with more than 35% year-over-year growth in each of the last two quarters. We are encouraged with the strong growth this quarter and are pleased to see an increasing number of samples received from several different biopharma companies running multiple clinical studies and an increasing number of incoming RFPs and opportunities. In addition, our team continues to deliver on test process automation and workflow optimization projects that have driven a steady increase in gross margins over the course of 2023, ending the fourth quarter with 77% gross margin, an increase of 11 points over fourth quarter of 2022. We've been exceptionally effective in providing our tests with industry-leading turnaround times and have made great strides in becoming even more efficient in the delivery of those tests. Finally, our commitment to a cost-disciplined approach while growing and expanding the business continues to deliver tangible results. Adjusted EBITDA in the fourth quarter improved 55% over the same period in 2022. We've built a commercial and operational platform that will help facilitate long-term, consistent, sustainable growth. And I believe everyone is beginning to appreciate the leverage that exists within the business model and our efforts to demonstrate the team's significant progress, and outstanding execution on our path to profitability. Before I turn the call over to Robin, I'd like to reiterate our commitment to transform the standard of care in lung cancer and improve patient outcomes with personalized diagnostics. Lung cancer is still the deadliest of all cancers, as it claims more lives annually in the United States than the combined total of the next three deadliest cancers, breast, prostate, and colon cancer. Time is of the essence when it comes to diagnosing and treating these patients. By discovering, developing, and commercializing tests with demonstrated clinical utility and best-in-class turnaround times, we believe that our diagnostic tests play a critical role in these efforts to treat the right patients quickly and effectively. With that, let me turn it over to Robin to review the fourth quarter and year-end 2023 financial performance.