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Operator
Greetings, and welcome to the CARE-DX third quarter 2020 earnings conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Greg Hadachek, Managing Director. Please go ahead, sir. Thank you.
Greg Hadachek
Good afternoon, and thank you for joining us today. Earlier today, CareDX released financial results for the quarter ending September 30, 2020. The release is currently available on the company's website at www.caredx.com. Peter Mogg, Chief Executive Officer, Reg Cito, President and Chief Business Officer, and Michael Bell, Chief Financial Officer, will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, are examination of historical operating trends Expectations regarding coverage decisions, pricing and enrollment matters, and our future financial expectations and results are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, October 29th, 2020. CareDX disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements, whether because of new information future events, or otherwise. This call will 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 measure may be found in today's earnings release filed with the SEC. I will now turn the call over to Peter.
Peter Mogg
Thanks, Greg, and good afternoon, everyone. I'm excited to talk to you today about our outstanding third quarter results and the great work our company is doing to improve the lives of transplant patients and caregivers. Before I get to our quarterly results, I would like to thank every member of the CareDx team once again. We have asked a lot from our team during these trying times, and they continue to bring their A-game. Their tireless work and dedication to transplant patients is driving our company to record financial results. In the third quarter of 2020, we reported revenue of $53.4 million, an increase of 58% compared with the third quarter of 2019. Once again, our year-over-year growth primarily came from our testing services, with revenue of $45.5 million. Product revenue for the quarter was $5.4 million, and digital and other revenue added $2.5 million to the top line. We have shown that because of our strategy to lean in and to expand our team, CareDX has never been stronger. And it is a pleasure to have seen Reg grow into the CEO position in this long-planned transition, which we announced earlier today. You have seen us executing a successful business strategy to become a leader in precision medicine, combining patient impact, incredible growth, and building a valuable, profitable company. The same has been true for our people strategy. Reg joined the organization in 2018 and has worked closely with me, the board of directors, and the management team to set the company's strategic direction. Reg has also led the commercial, clinical, manufacturing, and research and development organizations over the past two years, which has significantly and positively impacted the company's performance. Reg has also been instrumental in CareDX's evolution and has successfully executed multiple major initiatives, most notably the acceleration of the penetration of Allashore. In my new active role of executive chairman, I'm looking forward to working together with Reg in the years to come to continue to build CareDX into an incredible powerhouse in transplant care and beyond as we accelerate the growth from our existing platform.
Greg
Over to you, Reg. Good afternoon, everyone. Firstly, I want to thank Peter for his dedication and leadership in building CareDx from its IPO to where it is today. It truly is a special place that he's helped shape and build. Secondly, I'm deeply honored that the board has placed their faith and trust in me to lead CareDx during this next chapter of growth and evolution. And thirdly, I'm extremely fortunate with Peter staying on as executive chair. He'll be able to continue this journey together in a seamless fashion. As many of you know, he's been a mentor of mine for more than 20 years. With that said, this is such an exciting growth phase for KDX. We've been very successful in our response to COVID-19. We provided over 21,800 AlloShore kidney and Allomap heart patient results in the third quarter, an increase of 65% year over year. When the number of COVID cases began to accelerate here in the U.S., we made a strategic decision to go on the offensive and invest in areas that will drive growth and create near and long-term shareholder value. As we mentioned during our second quarter call, we look to allocate our capital wisely to position our company for robust growth, and some of these investments are already bearing fruit. The first of these investment areas is our direct-to-patient capabilities. Over the past several months, we have built out our community nephrology outreach team. As a reminder, community nephrologists provide care for transplant patients once they're safely discharged from the transplant center supervision. Through our newly formed group, we will encourage patients and their caregivers to continue to utilize AlloSure to manage the health of their transplants. Also, as part of our outreach program, we recently launched our AlloCare mobile app. This patient-centric resource was designed to help transplant patients better manage their medication adherence, coordinate AlloSure scheduling with patient care managers, and measure health metrics. We believe this comprehensive app will bring simplicity to the complex care regimen of maintaining long-term health post-transplant. Another area of investment that continues in our mobile phlebotomy offering is what we call RemoTrack. RemoTrack offers transplant patients the ability to have their blood drawn without the need to leave their homes. To date, approximately 150 transplant centers are offering RemoTrack to their patients, and over 5,000 kidney, heart, and lung transplant patients have enrolled. For the third quarter, tests originating from mobile phlebotomy made up between 30 to 40% of our test results. As expected, this rate was lower than the 40% plus level we experienced in the second quarter as clinicians and patients are more aware of how to reduce their risk of acquiring or transmitting coronavirus. That being said, we believe RemoTrack is a valuable service offering for transplant patients and their caregivers. The third area of our strategic investment is the continuous development and communication of new clinical data and the support of peer-reviewed publications. Early this month, we announced the publication of positive clinical data for Alloshore lung from the Multi-Center LIGO study. The study demonstrated that Alloshore lung could identify patients with acute cellular rejection, a critical need for lung transplant patients whose only other option to detect rejection is invasive bronchoscopy. With lung transplant patients having the lowest survival rate of any solid organ transplant, we believe having a non-invasive surveillance tool like Alloshore can be a game changer for improving the lives of lung transplant patients. We submitted our dossier to Moldex earlier this summer, which we recently updated with the newly published LIGO data. Regarding the communication of clinical data in a virtual world, we think it's essential to develop innovative approaches to provide continuing education opportunities to the transplant community. We're achieving this by attending virtual industry conferences, using new tools to communicate with clinicians and patients, hosting virtual CalO events, In early September, at the virtual International Congress of the Transplantation Society, we hosted four industry symposia, showcased six posters, and sponsored the plenary session. Not to rest on our laurels, we continued our industry presence by conducting a talk on ALICEAK-TX17 and presenting nine posters on CARE-DX offerings at the American Society for Histocompatibility and Immunogenetics Conference. Last, but certainly not least, there were 10 publications printed out about CareDx solutions in the third quarter, including two of the subjects of our recently announced pivotal AlloSure lung data. Regarding our ongoing clinical studies, we saw an acceleration in our OCRA study enrollment during the third quarter compared to the second quarter. Barring a significant increase in hospitalizations due to COVID-19 in the fourth quarter, we expect OCRA to remain at the pace we experienced in this past quarter. For our Sure study, the utilization of hard care continue at the rate we saw in the second quarter, as many TransLant patients switched their biopsy protocols to Allishore. While we reported 28% year-over-year growth on our products business for the third quarter, this business is still negatively impacted by the COVID pandemic. Because hospitals and TransLant laboratories across the US and Europe continue to restrict access to their facilities for some non-essential personnel, it has been difficult for us to gain much traction for our best-in-class product solution. Finally, We were very excited this month to receive final Medicare coverage for Alloshore Heart. After a rigorous technical assessment by Moldex program, it determined that our non-invasive Alloshore Heart surveillance testing protocol is a valuable solution for managing transplant patient care. This decision also paves the way for heart care, the combination of Alloshore Heart and Allomap Heart, to be made available to providers and patients. We expect to hear reimbursement news from Moldex before the local coverage becomes effective in mid-November. Now I'll hand over to Mike to discuss our financials.
Reg
Mike. Thank you, Reg. Turning first to the income statement, total revenue for the third quarter was $53.4 million, a year-over-year growth of 58%. Our top-line growth was driven by our short kidney and our map heart, which saw accelerated penetration this quarter. As a result, testing services revenue in the third quarter increased 61% year-over-year, to 45.5 million. Our third quarter product revenue increased to 5.4 million, and our digital and other revenue was 2.5 million. Moving to our gross margins. For the third quarter of 2020, the gross margin was 68% compared to a gross margin of 66% in the same period of 2019. The non-GAAP gross margin for the quarter was 71% compared to 69% in the third quarter of 2019. On a sequential basis, the non-GAAP gross margin recovered by approximately 300 basis points compared to the second quarter of 2020, primarily due to the significant increase in lab testing volume, supplemented by the slight decrease in the proportion of tests originating from RemoTrack and other mobile phlebotomy services. For the third quarter of 2020, net loss was 2.8 million, compared to a net loss of 1.8 million in the same period of 2019. Our net loss for sure 6 cents for the quarter compared to a net loss per share of 4 cents in the third quarter of 2019. Non-GAAP net income was 5.1 million in the third quarter of 2020 compared to non-GAAP net income of 0.9 million in the same period of 2019. Our non-GAAP net income per share in the third quarter of 2020 was 10 cents compared to a non-GAAP net income per share of 2 cents in the same period of 2019. As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization, and other income and expense. For the third quarter of 2020, we recorded positive adjusted EBITDA of $5.6 million, which is an adjusted EBITDA margin of 10% compared to adjusted EBITDA of $0.8 million and a margin of 2% in the third quarter of 2019. Net operating cash flow was positive $5.2 million in the third quarter of 2020, and we closed the third quarter with $214 million cash. As a reminder, in April, we received $20.5 million from CMS through its advanced payment program. Based on recent CMS announcements, we now expect CMS to begin to recoup this prepayment in April 2021. We are extremely pleased that in the third quarter we were able to get our gross margins back on track after the impact of remote tracking in the second quarter, and that we were able to deliver such strong adjusted EBITDA margins and positive operating cash flow, despite the continued investments that we've made across our operating expense line. As Rich mentioned, we have strategically invested in our future and have been on the offensive to drive growth and, ultimately, shareholder value. We'll continue to allocate capital with a focus on top line growth by developing our pipeline and expanding our sales and marketing efforts beyond transplant centers by going direct to patients and community nephrologists. Turning to guidance, while we have seen many transplant centers return to some level of normality over the last couple of months, there is still much uncertainty surrounding the ongoing impact of COVID-19 on our business. And as such, we will not currently be providing revenue guidance for the full year 2020. I'll now hand back over to Peter to close out.
Peter Mogg
Thank you, Mike. In closing, the third quarter was another record quarter for CareDX. Despite COVID-19 affecting all aspects of our employees' lives, we continue to develop and deliver new and unique solutions to improve the lives of transplant patients and their caregivers. Over the past several months, our company has shifted into a higher gear, and we will continue to keep our foot on the accelerator. CareDx has built a platform in transplantation which may shape the future of this exciting therapeutic area in many ways. As an example, I would like to invite the investor community to a virtual meeting, Innovation in Transplantation, on Thursday, November 5th, on 1 to 2.30 p.m. Eastern. Finally, I would like to congratulate Reg on his appointment to CEO, and I look forward to working closely with him. as well as the rest of the organization to continue to build CareDX into a powerhouse in transplant care. Thank you all for joining, and we will now open the call for questions.
Operator
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation token will indicate that your line is in the question queue. You can press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we call for questions. The first question is from Brandon Collier Jeffers. Please go ahead, sir. Hey, thanks. Good afternoon.
Peter Mogg
Good afternoon, Brandon.
Brandon
Peter, clearly you've been at this a long time in the CEO position. Just curious if you could elaborate just, you know, why now is the right time for this transition. Reg, we'll be curious, you know, if you have any, you know, potential changes in strategy or approach, perhaps around M&A that you might like to pursue. And, you know, Peter, do you think you'll pursue other opportunities outside of CareDX?
Peter Mogg
Your turn. No, Brandon, thank you so much for the question. You know, I was joking a little bit with the team. I'm moving now from overtime to full-time. on this position. I'll continue to focus on QRDX. I'll be working with Reg on the next phase for the company, which I think is incredibly exciting. Yeah, thanks, Peter.
Greg
I mean, Peter and I have worked very closely over the last few years on the strategy and the growth of the organization, and I've managed to cross all the business lines. I don't expect there to be any significant changes in the strategy. In terms of the corporate development, I've also been involved in all the different activities we've been doing over the last two years. So, again, that's part of the normal path and course of what we've developed.
Brandon
Thanks. And then the question, Reg or Peter, you hired a significant amount of additional patient care managers in the period. I'm curious just if you could perhaps quantify the initial impact from those new hires and really how you think about potential utilization of these reps or productivity either by tests or surveillance or centers as they sort of continue to mature, I guess, over the next few quarters.
Greg
Yeah, thanks. I mean, we see the PCMs truly as a strategic asset. which has played a key role, particularly during COVID and our response with RemoTrack. I think some of the key things to note is that when our patient care managers actually schedule the patients, it's actually a much higher adherence than when the centers do it themselves. I think at the same time, we're seeing benefit from them having a direct relationship with the patients because we now move to offerings such as AlloCare. So it really has been a real strategic opportunity As for the organization, I think we're seeing the benefits of that as well. It should be noted that we have more than 5,000 patients now on REMA tracks. That's also been part of the reason why we've expanded with the PCMs.
Brandon
Very good. And maybe one for you, Michael. Any color you maybe share with us as far as just kind of the investment plan or IPEX outlook, if only just for the fourth quarter, would be a helpful thing.
Reg
Yeah, Brandon, throughout the year, and I mentioned it on the descriptive remarks, we've continued to invest really on the research and development pipeline and also the sales and marketing. I would say for Q4, you should expect us to continue that investment and continue the increase. I would expect sequentially our operating expense to increase again in Q4 as it did in Q3.
Operator
Very good, thank you. The next question is from Steven Ma, Paper, Sandler. Please go ahead, sir. Oh, great, yeah, good afternoon, everyone.
Greg
Steven, good to have you on. Yeah, yeah, congratulations, Peter. Yeah, it's been a great run. Congratulations for all you've done to build CareDX to where it is now. And yeah, I believe it's in good hands with Reg. And a well-deserved transition for you to go from overtime to just working full-time. So well-deserved.
Peter Mogg
Thank you very much, Stephen. And you've been following the story for a long time. And, you know, there's so much opportunity yet as we're executing on this $2 billion, $2.5 billion TAM in kidney. And we're just in the beginning with heart and lung with so many growth drivers on the company. I'm so excited of handing this over to Reg.
Greg
Yeah, yeah. No, it seems like a good timing. And yeah, I think it's great. So yeah, so maybe just moving on to questions. I know you got the heart care decision. Do you have any indication on the heart care pricing?
Reg
Hi, Steven, it's Mike here. No, not yet. I think we mentioned again earlier in the call that we're expecting to get the reimbursement news, although the pricing by the middle of November, which is when this will go effective. But yeah, as yet, we've got no additional information.
Steven
Okay, great.
Greg
And then on kidney care, could you remind us again on the timelines and when you're going to submit for Medicare reimbursement? On kidney care for reimbursement, we're still continuing on with kidney care as part of OCRA, so it's part of an ongoing clinical study that we're doing at this stage. Okay, gotcha. Okay, and then finally, on a remote track, you know, I know it's hard to predict what the steady state level is as a percentage of volume will be, and I know transplant centers have reopened But, you know, could you give us a sense of what you think the steady state level will be going forward, maybe in like a 2022, sort of like a post-pandemic run rate? Yeah, I think for our steady state, we expect to be around the 40% mark. I think it's something that, you know, we're seeing that's a fairly, you know, relatively consistent number. And also with COVID-19, You know, there's some certainties there that would certainly lead to more remote track usage as well. Okay, gotcha. And can you give us a sense on how patient adherence has improved with remote track given, you know, continued COVID-19 pandemic issues? Can you just give us a sense of some color? Sure. Yeah, what we've seen is we schedule patients with non-remotrack and remotrack, and there has been actually an increase in adherence with the use of remotrack, and more importantly, when we actually schedule patients through our patient care managers, and there's significant increase versus what the centers do themselves. Patients, more importantly, they actually really like the offering, and I think that's one thing. There's been a bit of a pull for them to actually do more of it, and that's one of the drivers. The ability, particularly during this time, to have a blood draw at home has really been something that's really compelling. I mean, more than 9 in 10 patients really, you know, in the feedback have shared that this is something they want to continue doing moving forward. Yeah, yeah, that's just the sense I'm getting as well, yeah. Yeah, and we also have... It makes sense that you don't compromise, yeah.
Steven
I'm sorry. Yeah.
Greg
Oh, and I was going to say, also with the launch of AlloCare, I think this enables an additional point of... you know, direct patient contact as well. I think it's a nice patient continuum. We have, obviously, our patient care managers calling up these patients at Transplant Center, also calling them when they leave the Transplant Center, but we also have now, you know, a way of connecting patients through AlloCare as well, our digital patient app. So it's all part of the plan to continue this sort of interaction with the patient. Yep, yep, yeah, that makes a lot of sense. And maybe, okay, squeeze one last in, one more in for Mike. Given RemoTrack, you know, it's going to be a significant part of the volumes going forward. I know the margins are impacted with the phlebotomy. Can you give us a sense of how you can get to your stated goal of 75% long-term gross margins? Thank you.
Reg
Yeah, Stephen. And, you know, obviously, this quarter and third quarter, you know, we recovered really nicely on our gross margins back to where they were in the first quarter. So we sort of... got over that remote track hump already. And that increase, that improvement in Q3 was down to the volume coming into the lab. And I think as we look going out, as the volume continues to increase, then that's going to naturally drive improvement in the margins. But also we've got a lot of efficiency and optimization projects happening in the lab at the moment. So they'll drive that. And then, of course, on the top line, and we've mentioned this before, as we get additional reimbursement, and whether that's for Alisher Heart or we get private payer reimbursement that's coming through for Alisher and Kidney, as we drive the increase in average reimbursement, that's also going to drop down to the gross margin and the improvement. So I think we're feeling really comfortable that we can get to 75% gross margins.
Operator
There's a question from Alex Novick, Craig Holland Capital Group. Please go ahead, sir.
Alex Novick
Great. Good afternoon, everyone, and congrats, Peter and Reg, on the transitions here. You've put up some really impressive growth during a tough quarter. We touched on it a bit during the call. You've mentioned now this is the culmination of all your investments. You have RemoTrack, more patient care managers out there. the focus on protocols. You also have just the general push to go to liquid biopsy. But I was hoping you could kind of signal out for one of us is what is the most beneficial investment that you saw during Q3, generating the highest ROI in the quarter? And how do you think about that benefit continuing into Q4 and beyond?
Greg
Yeah, I think the most significant investment we made is, you know, the patient care managers. We continue our DTP strategy. I think it's really important for us as we build that connectivity, not only within the patient, within the transplant center, but moving out back into community as that sort of last mile. And I think what we've seen is, particularly during COVID, the response to COVID, the response to Remotrack has been amazing, and the offering they're like. I think now we're adding additional things as part of that suite to continue that relationship. So it's building that relationship with the patient, and clearly that all starts with the patient care managers where we offer this premium white glove service
Alex Novick
Got it. And to that point, are you starting to see the results of your investments within the community nephrology in this quarter, or is that all still to come?
Greg
Yes, we've built out our community nephrology team, and we're beginning to see some early benefits of that plan and strategy. We don't break out those numbers, but what we can say is that we're very pleased with the results that we've seen so far over the last three months.
Alex Novick
Okay, got it. And then given all the advances that Medicare is doing to drive more kidney transplants, what should be the underlying growth rate of that market for the next several years? And of all the programs that have been announced around kidney transplants and essentially moving people to perform a kidney transplant, what else needs to be done by either CMS or others to get to that doubling of kidney transplants in five years?
Peter Mogg
And that's a great question, Alex. And, you know, that's something that maybe I'm happy to take on a little bit to understand that dynamic better because, you know, there are very few industries where only 20% of the supply, you know, of the demand is actually met. But if you're thinking about for every transplant that we do, there are five more that we could do if we had enough organs. And so there is this latent demand and increase of organs will tremendously accelerate life of patients and the entire industry and ultimately benefit CareDx as well. So, you know, doubling of the organs within five years, I think that is a stated goal. We probably had a bit of a curveball with COVID-19, but we see transplant centers already back to full swing and many transplant centers are actually above the previous year. So, So I have no doubt that there is a lot of opportunity that we can do. Now, the most important element is that, number one, people go and donate organs. Number two is that these OPOs, these organ procurement organizations, are efficient and effective. And I think there's a lot of room to grow in the future.
Alex Novick
That's great. And then just last question for me. It looks like We're entering what would be called the third wave here in the U.S. for the COVID cases. With everyone's eyes and ears at CureDx focused on the transplant centers, what are you hearing about another wave regarding transplant volumes? Are they foreseeing more shutdowns or slowdowns like April or May? Or do they know how to better manage the virus now that transplants will continue?
Greg
Yeah, thanks, Alex. I mean, what we're seeing is a region by region, center by center response, and there's even some variability within locations. And what we've found is they're covering more than 150, you know, transplant centers across the United States. We have really good insights into what they need and want. And I think in response to, you know, COVID, remote track continues to be an offering where we have seen, you know, continual increase in more than 150 transplant centers today. So, I think that ability to respond and react to the needs has been really important for us across all different organs from kidney to heart and also lung.
Alex Novick
That's great. Well, I appreciate it. Thank you.
Operator
Thanks again, Alex. We have a question from Andrew Cooper, Raymond James. Please go ahead, sir.
Steven
Hey, guys, and congrats, Peter and Reg. A lot of kind of the core has been covered, so maybe I'll take it a little bit of a different direction into the The product bucket, just as we think about, you know, obviously your access to centers, you know, and to potential customers being limited, when we think about the European markets and the competitive environment and your access there, you know, what's the path or how should we be thinking about the path for particularly Alice's CFDNA as you try to maybe move, you know, more into that European market in the post-transplantation space?
Greg
Yeah, on the product side, I think, you know, if we look at the typing business, I might just cover that firstly. That requires demos and demonstrations. I think what we've found there is we've shifted pretty much to what we've done in the U.S. to virtual sort of approaches, and I think that will be plainly seen more of a benefit. I think we've built in the best-in-class virtual marketing capability, which has been recognized by many of our peers as well. So I think that's from the typing business ex-U.S. I think in terms of software DNA, we continue to have strong interest and I think this is an area where we continue to work with the benefit of having some direct infrastructure, particularly in Europe, has enabled us to do that. The other thing is we have many of the folks in the U.S. who are key leaders and supporters of ours who have actually been talking to their colleagues in Europe as well to make sure that there's this continuation of that information flow as well as why there's so much excitement about our shore. and now translating HUS and LSEC for DNA.
Steven
Okay, great. That's helpful. And then I know it was sort of brought up in a question already, but just as we think about, you know, kidney care, sorry about that. As we think about kidney care, is there anything, you know, that you take away from the conversations you've had, whether with potential customers or anywhere through the pipeline, around heart care that have changed how you think about, you know, the potential for that product longer term?
Greg
Yeah, absolutely. I think that's a really – I was about to lead into that because I think what heart care has been able to demonstrate is, you know, something that we've been trying to push with further innovation. As many of you know on the phone, you know, we're the first to bring gene expression profiling to transplant. We're the first to bring cell-free DNA into transplant. I think as we look at, you know, the combination of the multimodality approach, it's really, really important. In terms of healthcare, though, that was the first, you know, approved through Moldex demonstration. And for us, it really validates our approach with these showing that we could maybe be a trailblazer. I mean, one thing that's never lost on Caredex is drive for innovation, something that we do every day. And it's at the front of what we want to do as a company. So in that sense, translating that to kidney care, we've taken the same approach. And I think in addition to the cell-free DNA and the gene expression profiling, we've also added the ability of iBOX, which is really, you know, a validated algorithm in TransLang that we believe will make a meaningful difference. In addition, we've also got Euromap and Histomap as some additional offerings that we're working on as well. So, again, this kidney care multimodality is really the foundational basis of the future in TransLang.
Steven
Okay, great. And maybe just one more, you know, after the equity raise earlier in the year, as we think about you guys potentially being more more active in the M&A landscape, just any comment on sort of what you're seeing out there? Has COVID perhaps stressed some players financially where more is bubbling to the surface or anything we should think about in terms of where you may or may not be looking? Any update would be great.
Greg
Yeah, I mean, I think with the equity raise, it got us to be at a ratio similar to our peers, at least to the median. That's the first point I'd like to make. Secondly, we have multiple business lines, not just the testing services, but we also have the products and digital businesses. And there are multiple opportunities over the last few years that we continue to monitor and be in discussion. So it's something that is part of our normal course, but we believe that there are meant to be attractive options, and we'll see what happens as we continue to monitor those. Great. I'll stop there.
Operator
Thanks. The next question is from Sanjeev Nam, DTIG. Please go ahead.
Sanjeev Nam
Hi, thanks for taking the questions, and congratulations to both Peter and Reg. Was wondering about allo-sure lung. Could you remind us what the market opportunity there is in lung transplants? Just trying to get a sense of how many bronchoscopy procedures do patients undergo for reduction monitoring in the first year and then following the first year.
Greg
Yeah, I would think of Alishal lung as similar size to heart. There are about 3,000 patients in terms of that opportunity. Now, with lung transplant patients, this is sort of one of the highest mortality conditions. And with that, there actually is a lot more testing in the first year. And so I think with the protocol frequency that we're sort of establishing is originally initially the 744, but we believe that maybe with some of the feedback we're getting, that there's a need to continue this, you know, maybe even high surveillance as we look at that.
Peter Mogg
Yeah, and, you know, just to reiterate what Reg was saying, you know, lung has one of the problems that these patients don't live for the 10 to 15 years they've been seeing kidney and heart, but they probably, you know, have a a five-year, five-year survival. So in terms of the tail, this is not as a big opportunity, but it's very exciting because the unmet need is so significant. And so the publications that Richard was talking about, we have now three major publications on selfie DNA or alloshore in lung, which is very exciting. So, you know, I think here we benefit of taking the existing platform, go into this field, which is very adjacent and might be able to quickly, quickly accelerate on lung.
Sanjeev Nam
Great. That's helpful. And the recent Medicare NCD announcement, which obviously was largely a non-event, but just kind of curious, is that something you guys might pursue in the future? Could there be any benefits from pursuing the NCD route?
Peter Mogg
You know, I think that the reimbursement landscape in molecular diagnostic continues to evolve. I think the company in general has had a phenomenal run in making sure that, you know, our products are high-value diagnostics products and are recognized as such. I think we are very comfortable with the current approach to Moldex, which is a data-driven approach and getting through reimbursement through Moldex and then Iridium. But we are constantly evaluating other routes. You know, maybe going dual track one day might be an opportunity with a combination between the FDA and a central office approach. But right now, I think, you know, the heart care reimbursement is really a poster child on how we have thought through combining our multimodality offerings, and we're very comfortable with the current approach.
Sanjeev Nam
Gotcha. Great. And then maybe a couple of quick ones from Mike. What was the ALICE-L revenue contribution this quarter? And then would you be able to split the volume, you know, the split of the report volume for LMF Heart versus LMF, I'm sorry, ALICE or kidney this quarter or for years, I guess, year to date?
Reg
Well, first of all, on ALICE-L, you know, similar to the previous quarter, it's a bit less than... $100,000. So, you know, still early days yet for LSL, and we hope to be announcing more on that, you know, as we move forward. Splitting out the volumes, you know, now I think the way that we look at testing services is in total commercial volume for both Alamap and Alashore. And so, yeah, the volume was 21,800 for the quarter, which was, you know, fantastic growth, but no, we're not splitting that out.
Sanjeev Nam
Okay. Sounds great. Thank you so much.
Operator
Thank you. As your reminder, if you wish to ask a question, press star 1 on your touchtone telephone, the star 1. We have a question from Yu Chen, HC Wainwright.
Yu Chen
Please go ahead. Thank you for taking my question. First question is, which factor contributed more for the body growth in patient results disquired? Is it penetration in transplant procedures at each transplant center or patients becoming more compliant with surveillance protocol with remote tracking?
Greg
Yeah, both have been significant levers for us, but I think the hallmark of our growth has been with driving the protocols, and we continue, we're at more than 50 protocols continue to grow each quarter. So it's such a significant opportunity for us as each center develops our shore-specific cell-free DNA protocol.
Peter Mogg
And maybe to add to this, you know, we're so early still that there's new patients coming onto the platform all the time. So, you know, we're right now, depending on how you look at it, 5% to 10% penetrated. So the growth is primarily still driven by new patients coming onto the platform, while at the same time, Reg was mentioning with our patient care managers, we might edge up on the compliance rate and the adherence. But right now, you know, our growth continues to be very dynamic by new patients being added to the platform. Got it. Thanks.
Yu Chen
Next question is, sales and marketing expenses have shown a decreasing trend as a percentage of total revenue for the first three quarters. Do you expect that trend to continue?
Reg
I think that will continue. But having said that, we will still be continuing to invest in sales and marketing in the That expense line grew sequentially in Q3 because we've added all of the patient care managers, and we're still investing in that, and we're focusing on community nephrology. So I think it will still continue to grow, maybe not as fast as the revenue growth. Got it. Thank you.
Operator
Ladies and gentlemen, We have reached the end of the question and answer session. I'd like to turn the call back over to Peter Mogg for closing remarks.
Peter Mogg
Well, thank you very much for joining as we are building a tremendous powerhouse in transplantation. Thank you very much, and I'm looking forward to future discussions. We'll keep you updated. Thank you.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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