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spk05: Greetings and welcome to the CareDx Incorporated second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A 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 Ian Cooney, Vice President of Investor Relations. Please go ahead.
spk01: Good afternoon, and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended June 30th, 2021. The release is currently available on the company's website at www.caredx.com. Reg Cito, President and Chief Executive Officer, and Ankur Dhingra, 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 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, our 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. 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 Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, July 29th, 2021. 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 Reg.
spk08: Thanks, Ian, and welcome to KDX. Good afternoon, everyone. and thank you for joining us for CareDx's second quarter 2021 earnings conference call. Today, I'll focus on five key highlights from the quarter. The first is our record revenue growth driven by testing services. The second is expanding our leadership across new organ areas. The third is continued leadership with innovation from both our internal pipeline and from external partnerships. The fourth is building on our 2021 theme of connecting the patient as part of the patient journey. The fifth is to highlight our excellent financial position and the increase of our four-year guidance to be covered by UNCA. On the first topic, we had another stellar quarter of growth. Our record 77% growth in total revenue from last year's go-quarter was driven by new volume hires with our patient testing services. Our sustained success is because we focus on bringing leading innovation to meaningfully improve the outcomes of transplant patients. Our 100% focus on the transplant patient over two decades has led many to consider and to call us the transplant company. As part of this, I want to thank each and every one of the CADX team in delivering on our vision on being the leading partner in transplantation. For the second quarter results, total revenue was 74.2 million, increasing 77% compared to the year-ago quarter. The main driver of growth in the quarter was from our testing services revenue which increased 79% to 64.9 million. In addition, revenue from our products business increased 108% to 6.9 million, and digital and other revenues contributed 2.4 million to the top line. I'd like to highlight the global products business was in launch mode at the start of the pandemic. The H1 2021 performance is a reflection of improved conditions at XUS, as well as the strong demand for NGS products that we deliver. The products team is excited to be in launch mode again. In the second quarter, CareDX provided 37,400 L-SHORE and L-MAP test results to transplant patients, growing 109% from the second quarter of 2020. Approximately 6,600 of these tests were part of heart care. Our comprehensive gene expression and donorized cell-free DNA assessment graph rejection. At the end of June, more than 295 kidney centers and community practices and greater than 120 heart centers were using our offerings. Notably, more than 65 kidney transplant centers in the United States have now adopted an Allishore testing protocol. Our direct-to-center approach remains core to our strategy, where we are focused on building the mode through an expanded portfolio of offerings within the transplant centers and by increasing the number of Allishore testing protocols. We've also started to replicate our unique service model in building our community nephrology presence. In this way, our team can be more effective in connecting transplant patients and the community nephrologist once their care has been transferred from the transplant center. We're uniquely positioned to play the role of connecting the patient, especially as we take a long-term focus on the transplant patient journey. During Q2, we continue to expand on our leadership through multimodal innovation to new areas. In liver, we announced enrollment of the first patient in the MAPLE study. MAPLE is a 1,500-patient multicenter prospective study using our multimodality approach to assess the status of liver allografts. For lung, we're very excited by Alishore Lung as new innovation for lung transplant patients, especially as 50% of allografts fail within five years. Our submission is under technical review by Moldex as part of the new LCD process. As previously mentioned, we had submitted Alishore Lung in the middle of last year. In support of driving record growth and leadership, we are hyper-focused on leading with innovation and scientific data generation. At the two largest transplant conferences in 2021, ICHLT and HEC, our testing services offerings an innovative pipeline with a focus of more than 65 scientific abstracts. It takes an incredible commitment to build such a significant body of clinical data, especially in the diagnostic space. Again, this has only been possible because we're 100% focused on transplant and the transplant patient. The key highlight from the HEC conference was the announcement of KL1000, the analysis of our one-year data from the first 1,000 patients enrolled in the KL study. This prospective study included more than 50 transplant centers and was designed to evaluate the safety and efficacy outcomes in kidney transplant recipients whose post-transplant care is managed using Alloshore. The noteworthy findings from the first 1,000 patients were one-year graft survival among patients monitored with Alloshore was higher than those of patients reported in the National UNOS Registry data. Alloshore use in patient management significantly reduces the number of biopsies performed as compared to biopsies guided by serum creatinine and Alloshore discriminates rejection from no rejection in both routine surveillance and full-cause groups. We're also delivering innovation in the stem cell and cell therapy space. These are substantial longer-term opportunities that we are executing against. With our proven track record to understand patient needs, clinician preferences, and the center workflow, we're able to develop these testing solutions by leveraging our broad technological capabilities. We recently announced the launch of Alloheme in the Acrobat study, introducing our latest innovation in testing services for stem cell transplant patients. In driving transplant innovation, we also continue to support the broader ecosystem by investing in and acquiring or partnering with innovative companies. For example, in May we announced an investment in Mirror Matrix, a life sciences company pioneering a novel technology for bioengineering fully transplantable human organs. With close to 120,000 people in the U.S. on the wait list and only 40,000 valuable organs per year, We believe in investing in companies addressing organ availability through novel innovations. In June, we augmented our pipeline with OrganX through a strategic agreement which will develop advanced analytics and AI to integrate our shore data with large transplant databases to provide clinical data solutions. We've also shared that for 2021, our key theme is connecting the patients as part of the transplant patient journey. We recognized early on the strategic value of patient care managers and have now added digital platforms to strengthen this patient interaction. We've also expanded the availability of our AlloCare app to Android platforms. Today, we have an easy-to-use mobile app designed to help organ transplant patients manage their medications, schedule lab appointments, and view their test results. This app will be augmented by our acquisition of Transplant Hero, a mobile application provider of novel cloud-based medication management solutions for patients. As we continue to connect the transplant patient, we now manage more than 29,000 referrals from dialysis practices to the transplant centers and more than 7,000 patients on the wait list at centers. We have also more than 9,000 patients that have signed up for Remotrack. Before turning the call over to Ankur to discuss our financials, I'd like to say how pleased I am to have Dr. Hannah Valentine join our board. Dr. Valentine is Professor of Medicine at Stanford and former Chief Scientific Officer for Science, scientific workforce diversity at the National Health Institutes, NIH. We're excited to have Dr. Valentine join our board, and we all look forward to working with her and learning from her. Now handing over to Ankur.
spk07: Thank you, Reg. I'm very pleased with the business performance and our financial results for the second quarter of fiscal year 2021. Let me provide you more details. Turning first to the income statement, our second quarter revenues grew 77% on year-over-year basis to record $74 million. We see continued very strong adoption for our testing services and products. Testing services revenues grew 79% year-over-year to $65 million for the quarter, driven by strong volume growth in both kidney and heart patient results. Product revenues increased 108% year-over-year to $6.9 million, driven by strong demand for our NGS products across all three regions. Digital business revenues were $2.4 million, growing 10% year-over-year. Moving to gross margins, for the second quarter of 2021, the gross margins were 68% compared to a gross margin of 64% in the same period of 2020. The non-GAAP gross margin for the quarter was 70% compared to 68% in the prior year's second quarter. We are driving productivity and efficiency in our lab operations. At the same time, we're also investing to scale our capacity for higher volumes, both for current services for heart and kidney patients and also for upcoming new services. Operating expenses for the quarter were $55 million. We continue to invest in R&D pipeline, both in development of new services for transplant patients and also clinical trials to provide data on clinical outcomes. As Reg mentioned, we recently reported long-term data for our CAOR study demonstrating the long-term benefits for kidney patients. Similarly, we continue to build our commercial capabilities across multiple organs and also across the patient transplant journey. For the second quarter, net loss was $1.9 million compared to a net loss of $6.6 million in the same period last year. Our net loss per share was $0.04 for the quarter compared to a net loss per share of $0.15 in the second quarter of last year. Non-GAAP net income for the quarter was $5.9 million compared to a non-GAAP net income of $1.7 million in the same period last year. Our basic and diluted non-GAAP net income per share in the second quarter of 2021 was 11 cents compared to a basic and diluted non-GAAP net income of 4 cents in the same period last year. As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization, and other expenses. For the second quarter of 2021, we recorded positive adjusted EBITDA of $6.8 million, or 9% of revenue, compared to an adjusted EBITDA loss of $2.8 million in the second quarter last year. Cash and cash equivalents and marketable securities at June 30, 2021, was $370 million. On an operating basis, we generated record cash from operations of $9.8 million in the second quarter. On the capital deployment side, we actively deployed capital in continuing to strengthen and expand our portfolio in the transplant ecosystem. We invested in Transplant Hero to bring medication management capability to our direct-to-patient offerings. We invested in Mirametrix to support expansion of available organs for transplant. And we partnered with OrganX to develop advanced analytics aimed at transplant patient journey. Turning to guidance, we are updating our 2021 revenue expectations to reflect our second quarter results and the continued strong demand for our testing services in the United States. As of today, we anticipate $290 million in revenue for the year. Our guidance balances the ongoing uncertainty around COVID variants, and includes continued market penetration of our products and services. We see great demand for our services and continuation of very positive response from patients. As the transplant partner of choice, we have a tremendous opportunity in front of us to provide innovative clinical and digital offerings across the patient transplant journey. We remain focused on realizing that opportunity. With that, I'll open the call for questions.
spk05: At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would 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. Our first question comes from Andrew Cooper with Raymond James. Please go ahead.
spk10: Hey, guys. Thanks for the questions. I guess maybe first, can you give us an update on the attachment rate for heart care with or for AlloSureHeart with Allomap and any kind of updates on conversations with the commercial payers and and what that trajectory could look like as we think about the 6,600 tests getting paid from here forward.
spk08: Yeah, thanks, Andrew. I'll take the first question. I'll let Ankur talk a bit about the coverage. But yeah, the attachment rate is above 85%, I think, in the last quarter. We talked about it being between 80% and 85%. And what we've seen is this incredible need with the clinical utility of this multimodality approach. And we're really excited and so proud to be the first and only company to achieve this. And I think with that, we truly see some real clinical benefits, you know, obviously evidenced by the rapid attachment. So, Ankur, do you want to comment a bit on the commercial coverage?
spk07: Yeah, general ongoing update on the coverage. So we continue with our discussions with the commercial payers. We did get some little bit additional covered lives across some of our portfolio in Alishore. But as such, the adoption and the coverage discussions both are going quite well.
spk10: Okay, great. And maybe just one on the guide, you know, appreciate the raise, but I guess as I just think back to 2020, you know, your volumes were really pretty resilient in the face of COVID with the bigger impact on the product side. So just help me think about kind of the puts and takes here when we think about the run rate we just saw in the second quarter relative to raising the guide maybe a little bit more modestly than some folks might have hoped.
spk07: Yeah, thanks for the question, Andrew. This is Ankur. So, yeah, we're very pleased about the overall business performance, very pleased with the momentum here, raising the guidance at $10 million at the midpoint. The increase at the midpoint reflects the strong performance for Q2 and also includes increasing the guidance for Q3 and Q4 as well. So we're raising the back half relative to what we said last quarter. I'd also like to remind you that in the first half, in the first two quarters now combined, we've raised the guidance by $25 million for the year. So very pleased overall. We've seen good momentum in our business. We've seen good adoption in our business. Probably some people might ask, no one-time kind of performance in Q2 either. As we look forward to our guidance, our intent and the drive is to continue to drive the market penetration model, and we expect to keep driving that. Given where the COVID variants are today and where all the discussions are, we felt it would only be prudent to not ignore that given the risks that are in the environment. COVID in the past has been, once we put remote track in place, was structurally beneficial for us on the testing services side, but on the product side, we did see some ramifications in the short term. We have not seen anything like that right now, but we felt it would be prudent to not ignore the discussions that are happening right now.
spk10: Okay, great. And maybe just one last one for me, just in terms of you know, the cash balance, it's nice to see some of it go to work when we think about Miro Matrix and Transplant Hero. But are there things out there, you know, maybe a little bit bigger in size that, you know, are attractive to you and you're considering what does that pipeline look like? And just how do we think about use of cash given, you know, EBITDA positive again in the quarter and kind of trending towards generating more cash as opposed to necessarily needing more with a pretty clean balance sheet?
spk07: Yeah, our focus still remains on continuing to add assets within the patient transplant journey. You've seen us take the approach over the last several quarters where we continue to add assets within the portfolio and add offerings. That approach will continue. In general, the funnel has a whole lot of opportunities of various sizes, but our approach towards adding offerings is the approach that remains.
spk10: Great. I will stop there. I appreciate all the questions.
spk07: Thanks.
spk05: Our next question comes from Matt Skyes with Goldman Sachs. Please go ahead.
spk04: Hey, thanks for taking my question. Hi, Reg and Ankur and Ian. Just maybe one bigger picture question. Reg, you've mentioned on past calls and on today on some of the key drivers for growth, one of which being in the past you talked about the community nephrology, which you're pushing into. Any update on your progress there? And then on the second one, just on the patient journey, Appreciate all the apps and the technology that you're developing to get to the patients. Any color on sort of any metrics we can use to see the success of the engagement with patients, downloads, et cetera, things like that that we can see are making an impact to the patient?
spk08: Yeah, thanks again, Matt. On the first one on community virology, it certainly has been an area of focus for us since the start of the year. We had the team ramped up. I mean, firstly, we're well ahead of expectations. I think in the prior quarter, we shared more than 100 community virology centers we're now using. I'll show we can seem to see really nice growth during Q2. The key for us is really making sure that we have a long-term plan, and that will eventually involve the movement of addition to protocols, which we've seen happen during Q1 and actually Q2 in the community virology setting, as well as now moving to potentially some additional offerings in that space as well. So Community virology is really this incredible point of continuation that we have, and we're in a unique position to play the role of transitioning a patient from the transplant center when they go back to the community. So really exciting, and we'll have expectations. On the patient journey, this is really pivotal to what we do as a company, and really every single piece of what we've been adding, whether it's from our internal pipeline or from some of the external BD partnerships, It focused on this pre-peri, post-transplant journey, and I think getting that digital connection as well as now sharing some of the actual patients themselves, the 29,000 referrals, for example, from dialysis centers moving into the transplant center, and then the 7,000 of the actual, those on the active wait list, moving on to those who actually receive the transplants with one in three kidney patients or one in two heart trans patients getting offerings, and then moving on to the post-transplant journey. So as you look at that digital, and as you mentioned, the app plays a key part of that, whether it's pre, per, or post. You know, we've had thousands of patients, you know, download the app. It's really, you know, progressing really well. We've seen some improved, obviously, performance measures when patients are on the app, as well as using our patient care manager. So really exciting to have accelerated this type of platform during the course of the last six months. And, you know, we continue to see a lot of excitement, not just from the patients, but also from centers. They see what we bring as incremental offerings and value.
spk04: Great. Thanks for that, Raj. Very helpful. Collar, just one more from me. Just curious, obviously, COVID's pretty unpredictable, but clearly things seem to be going in the wrong direction. But now you've got the RemoTrack asset. This is well-developed. I'd love to get an idea from you as to the utilization. I'm sure it was obviously very strong, and it's probably come down a little bit. But do you feel like you're in a much better position now, obviously, with RemoTrack, And has utilization actually stayed fairly high with patients using mobile phlebotomy, or will you have to see a transition back to that in case things do indeed worsen from here?
spk08: Yeah, remote track itself on mobile phlebotomy has been an exceptional offering that we've built out. And last quarter, I think we shared it was around 40%. This quarter continues to be around 40%. So we see, even with the increased volume and growth, really strong support for the the mobile business we've built. Again, as you talk about that access to the patient, this is just the beginning of how we continue to look at how we interface with this patient where we have this direct consent. So again, really consistent with what we've seen in prior quarters in terms of that usage.
spk04: Great. Thanks again, guys. Thanks again, Matt.
spk07: Thank you, Matt.
spk05: Our next question comes from Steven Ma with Piper Sanma. Please go ahead.
spk09: Hi, guys. Congrats on the quarter. Thanks, Steven.
spk08: Thank you very much.
spk09: So maybe a follow-up question on the attachment rate for Alisher Hart. What do you think the max attachment rate you can get to? You're approximately 85% right now?
spk08: Yeah, we're above 85%. 85% at the moment. And I think to get even this level has exceeded, I think, anyone's expectations. I mean, from us, we certainly knew there was incredible clinical utility, but I do think if you think of a multimodal test being at this level, I think it would be the enemy of any sort of predicted or projections that one could achieve. So, I mean, clearly the upper limit is 100%, right? So I think as we continue to have clinical utility, we'll see if we get there. But I think we're very happy with the numbers that we've just shared.
spk09: Okay, great. And then another follow-up question on the direct-to-patient strategy. You know, obviously you guys have made a significant investment over the years and continue to make investments, for example, Transplant Hero. Can you point to any one of those strategies which is maybe driving this volume growth and patient adherence? And then a second part to that question, should we expect you guys to continue to invest into this direct-to-patient strategy?
spk08: Yeah, I mean, firstly, it's not one single thing. I mean, the basis was, you know, COVID did accelerate our direct-to-patient strategy, which, you know, started with remote track, was the offering. And I think from there, we have always had our strategic patient care managers, and we were one of the first companies to realize, you know, how incredible it would be to have these folks involved in the management of these patients. And so if you think of patient care managers, then with the addition of the app, now moving on to potentially other offerings, it really has helped drive an incredible adherence rate and also just continual stickiness with what we do with our core product. So I think not one single thing, but I think it's all additive, and I think you'll see more of that. So again, we're really excited by the combination of offerings we've brought to the patient and that can only increase. I think your second question is, you know, are there other things that we may continue to do? And I think we'll continue to, you know, add to our patient care offerings. You know, what we see is an entire ecosystem out there and we're going to continue to invest in this direct-to-patient journey because for us it's, you know, it's so important for us to connect all the pieces from the pre, peri and post. And It makes it easy being, you know, the company or the transplant company and being 100% focused on transplant. I think everyone looks up and looks up to us and expects us to lead the way, and that's what we've found so far.
spk09: Okay, got it. Thanks. And then just maybe a follow-up question. So on Transplant Connect, yeah, it looks like you've got really good growth over the last quarter, went from 20,000 dialysis referrals to 29,000. went from 500 dialysis centers to 800 and 30 weightless transplant centers to 50. What's really driving that really fantastic engagement? Is it what we've talked about?
spk08: Yeah, I mean, there's been some changes in the kidney initiative, and I think we've realized that there are It involves multiple parts of that ecosystem, whether it's from OPOs or whether it's dialysis centers or whether it's community nephrologists. So I think there's all these macro changes we've seen. And we anticipated the impact of one of those macro changes was dialysis centers have an incentive to progress patients more, to refer patients more to transplant centers. So as part of that, we developed an offering which we believe is the best in class and one that you know, leverages what we have in terms of our email platforms, both with Otter and TransChat. So what's been the attraction here is, you know, we've created a solution to address an unmet need, which is how do you get referrals in a seamless way to the transplant centers? And secondly, how do you ensure there's an electronic way for communication? And so really what we've seen is bringing something that addresses an unmet need, which we're really good at, and then two, being able to introduce that in a way that we're trusted really helps us and really has helped us bring this to market.
spk09: Okay, great. Thanks. And then the last one for me, it's on Elohim. Can you just confirm that it's not going to be covered under the transplant umbrella LCD? And how do you think about reimbursement for Elohim? And do you envision a similar sort of multi-test surveillance protocol similar to Alisher? Thank you.
spk08: Yes, so Elohim, and I think you saw the recent release we had with the Acrobat study with the first patient enrolled for stem cell transplant, is not part of the solid organ universal LCD, so that's the first thing. The second thing is, as we look at Elohim, it's being used in what we believe is the next generation of chimerism. What the study itself is looking at is how do we measure, obviously, stem cell engraftment, but what the study itself is trying to do is look at and measure relapse, which has never been done before. So I think there are multiple different approaches to existing reimbursement or to future reimbursement. But the important thing here is we want to drive innovation. It's something that is a hallmark of the company, which is what we stand out for is innovation. And so we're trying to do something which hasn't been done before, which is now providing a test that can look at and measure relapse in this approach. So that's what we're sort of taking. But here there are multiple avenues of options for coverage.
spk07: And just to clarify there, Stephen, I think on your question around reimbursement, the current universal LCD covers solid organ transplant. So as we work through this, our expectation is the Elohim does not get covered in that.
spk09: Yep. Yeah, that's right. Yeah, I just wanted to confirm that it's not covered. And my second part of the question, do you assume that this is going to be kind of a multi-test protocol as you look for for relapse? Is it going to be a multi-test, a multiple test per year, or once a year? Can you give us a sense of the testing frequency, maybe?
spk08: Yeah, no, so this will be a longitudinal patient management test as well, similar to what we've done in other transplant fields. It's important to actually have that patient monitored longitudinally.
spk09: Okay, thank you.
spk08: We haven't shared on the frequency, but yeah, it would be longitudinal.
spk09: Okay. It'd be longitudinal, so okay. All right. Thank you.
spk08: Thank you again.
spk05: Our next question comes from Brandon Colliard with Jefferies. Please go ahead.
spk06: Thanks. Good afternoon. Good afternoon. Hey, Brad. Res, the sales and marketing spend in the second quarter jumped pretty considerably sequentially. Just talk about the areas where you're investing most heavily, and then, Ocker, it'd be great if you could share kind of an update on OPEX Outlook for the full year?
spk07: Yeah, sure. So our investments, primarily you see our sequential investments going heavily into the R&D and the sales and marketing. Your question is focused more on the latter. So we've been preparing our team, especially our heart team, for potentially upcoming approval for our For our lung launch, that has been one area where we've been investing. And then you've heard us about continuing to work on the nephrology side of things, which has been another area where we continue to invest from the kidney perspective. But if you step back from those details, in general, developing our commercial capabilities towards a multi-organ, solid organ transplant commercial channel, that thematically is the investment within the within the sales and marketing direction. If you think about the direction going forward, that on the sales and marketing side will remain thematically where we will invest more. And then on the R&D side as well, under the new LCD, we have the opportunity to pull in a lot of our pipeline as we have. So we've been increasing our investments in that direction, both on the development side of things as well as on the clinical trial side of things so that we can enrich our pipeline sooner than our original plans.
spk06: Gotcha. And, Reg, obviously good progress in terms of the number of transplant centers adopting Alisher protocols. Would you just talk about the impact to test volumes when a new center adopts? And are you able to, to some extent, sort of block out competition when you've got a new center establishing Alisher protocols?
spk08: Yeah, I think for us the gold standard is to have a centre get onto protocol. It takes a real lot of effort now that the early adopters have done from the first year and we're almost into year four. To get those protocols, they have to be earned, and it comes from multiple engagements, sharing clinical data, getting clinical use experience, but also showing that you're the leading innovator in the space. And I think certainly once you... get that main protocol. We don't count it unless it has the word AlloSure in it. So if it just has cell-free DNA, for example, or if a center uses a regular frequency but it's not on protocol, we don't count that either. So we do think it's important to have this relationship, which we've built over 20 years, continue with these centers. And it's a real honor and privilege once they put us on the protocols as part of that. So yeah, it's core implicit to the strategy that we've developed. And yes, there's a nice increase as consistent with the protocol once it's adopted.
spk06: Got you. Last one from me. Any update on timing for kidney care launch? And would it be unreasonable to look at the capture rate that you've experienced for heart care and use that as a proxy for future kidney care rollout?
spk08: Yeah, I mean, kidney care and multimodalities is an area that we're truly excited by. It's one where I think it was validated through heart care, and now that we're actually doing that across organs, kidney care, lung care, and liver care. In terms of LMAP kidneys specifically, I mean, you know, for us, we are putting the process in place. For example, we mentioned we'd have clear, you know, validation for the lab set up by the end of the year, but, you know, clearly there's a process which we're going through for lung, and we're learning from that, and so I think you know, we continue to be on track with, you know, based on that new LCD and, you know, we're putting things in place. But, you know, apart from just sharing the clear validation, we have no other sort of guide in terms of, you know, timing of when to expect that. So that's sort of, you know, an area that we see extremely exciting. But again, we're on track for what we want to do. Great. Thanks. Thank you again.
spk05: Our next question comes from Alex Nowak with Craig Hallam Capital Group. Please go ahead.
spk02: Great. Good afternoon, everyone. Raj, you've had about two months now to get the word out about the KOR results. What's the initial feedback from the transplant doctors, and how do you think this changes Alisher's utilization now that doctors can see if they follow protocol, they're going to have less graft failure?
spk08: Yeah, that's a really good question. I mean, I think as we've rolled out, we had KL Data first announce ADC and had sort of multiple sort of follow-up calls across the country. I think there's a strong level of excitement, but also validation. So I think in many ways, some of the results that we shared had sort of been seen by some of the centers in their real-time utility, for example, from the Admiral study. And so I think, if anything, it's just further validation of and getting long-term study data, which we're the only company to have established. So I think that's been really good. Where this could come more in terms of utilization is probably from the commercial pay side. I think that's where this information is being used and sort of progressed a bit further by our payer team. And so that, obviously this was some interim data and there's more data to come, but that's where I think the further upside would come from. But I think we're so well established in centers and they've got their experience, this just further adds to it. I mean, there were so many useful insights that came from these long-term studies. And again, we're the only ones who have done long-term studies. And what we saw in advance of that was also the prediction of earlier formation, for example, of DSAs through de novo DSAs. So I think things like that which have been repeatedly shown in these long-term studies, first in the Admiral and now at CAEL, really reinforces true insights. And I think seeing that now that reduction in biopsies, the increase in overall outcomes was something that was just really compelling and powerful. But centers and users were seeing that as well as part of their own experience.
spk02: Okay, understood. And can you just clarify what you said on Allisher along with the tech assessment, where that stands? When do you expect that to be finalized? And then when would you expect the OCRA study to read out? Any update there?
spk07: Okay, I'll cover the lung part, and then Reg covered the second part on OCRA. So overall, on the lung side, no change. The status, as we've said before, we're under technical assessment with Moldex. The dossier and all of the details that Moldex has requested under the new LCD have been filed. And Based on the process that has been communicated, we would expect a result sometime in the half two of this year.
spk08: On OCRA, I mean, we've shared and consistently, I think, we're still on track to complete enrollment of OCRA before the end of the year. What's clear is centers really crave innovation, and this multimodal approach that we've taken with kidney care, which includes AlloShore, Allomat, Plus, iBox, has really been something that has really just moved very quickly because of that unmet need and you know, that drive to work with leaders on innovation. So the completion of enrollment will take place by the end of the year. And I think, you know, Alex, no surprises. We start generating data. The future for us is then getting to OCRA 1000, right, in the future. So as we continue to develop long-term studies innovation, we've got CA 1000 with more data to come. And then clearly once we finish enrolling OCRA, then that'll be the next sort of thing. The goal is to keep on moving the needle with innovation, right? We're the market leader and You know, we're so well-known in transplant, and people have just come to expect us to bring the innovation, so we continue to do that.
spk02: That's great. Thank you.
spk08: Thanks again, Alex.
spk05: Our next question comes from Mark Massaro with BTIG. Please go ahead.
spk11: Hey, guys. Thanks for taking my questions. Congrats on a strong quarter. Hi.
spk02: Thank you.
spk11: Yeah, so you beat by 9% on the top line, $6.4 million, and you raised the guide by $10 million for the year. I mean, should we think about the delta or call it $3.5 million or so for each of Q3 and Q4, or do you think it could be more weighted to Q4 for each?
spk07: Yeah, I would probably keep it equal between Q3 and Q4. The overall, as I was saying earlier around the guidance, we're very pleased with the momentum on the adoption side and the fundamental business model on trying to continue to drive the market penetration is the model we're working with. So use that. So I would take it across half two.
spk11: Okay. And this looks like it's your fifth consecutive quarter of both double digit revenue and volume growth sequentially. And so when I think about your business, obviously, an increase in the attach rate on heart care, higher utilization with RemoTrack, greater outreach to community nephrologists. Are there any reasons to think that you can't continue this double digit type growth trajectory on a sequential basis? I guess, what types of things could we look out for that that might render that growth rate unsustainable?
spk07: Yeah, I think where you're pointing, Mark, we have a fairly large and very attractive market in front of us where we're in the early stages of market penetration. So the model that we're working on that Raj has described around the direct-to-center side where we continue to introduce and add our products into centers or continue to drive protocols and their adoptions That business model continues. We still have long ways to go. We've had tremendous success over the last four to five quarters, both in the centers as well as starting in the nephrology setting at the start of this year. And that remains our biggest focus going forward as well. As of now, we haven't seen anything that would point to any change in adoption or momentum there. The range of the guidance, as I was talking about earlier, it would also not be prudent for us to keep our eyes off whatever is going on relative to COVID variants, et cetera, especially on the product side of our business. But in the core services side, the business momentum was quite good. That's great.
spk11: And then we'd be curious to learn more about your allogeneic cell therapy business into You know, if you have any update on the work with Atara Biotherapeutics and, you know, can you just give us a sense for, you know, how the AlloCell product is, you know, what kind of feedback you're getting and if there's been any, you know, new customer activity there?
spk08: Yeah, Mark, I mean, we're excited by, you know, the different areas of transplant we're going to. So moving from solid organ to we just talked briefly about the stem cell space and clearly into the cell therapy space with AlloCell The only publicly disclosed offering that we can mention is Atara because the other partnerships have not allowed us to mention those and even with Atara we had to actually, we weren't allowed to disclose until we kept on asking and they finally were okay with us sharing it at the TCD conference. So we continue to see strong interest and partnerships across companies and I think it's an area that We'd love to share more about potentially at some point an invest date. It's really a bit dependent on others allowing us to do so. I think the key thing here is the feedback, is having a standardized, really sort of sensitive test has been really helpful as we've got feedback from the different companies. Because there's no real standards today, and so I think a couple have developed their own home brews, but as they use Allosol, they go, okay, this is great. Now we have a way of... using a reference standard and using across the samples that they have today. We've had multiple ad boards as well, and I think there's been a really strong level of excitement of even partnering and wanting to work with us as well, amplified as a result of what they're hearing from some of the other partner companies as well. So strong, I think, positive sort of interest, and I think obviously the only thing is it's out of our hands in the terms of sharing who those are. And secondly, just as long as these studies continue, because we had some examples where some partners decided to deprioritize or some partners decided to discontinue programs. So I think sometimes you're subject to the whims of drug development. But again, strong interest. And this is something that we continue to invest and grow in.
spk11: Okay, great. And as you're nearing a final Medicare determination for Lung, Can you maybe characterize how synergistic the lung opportunity is with the kidney and the heart? I guess any statistics you have on the number of transplant centers that are, you know, really working with all three versus any specialty transplant centers?
spk08: Yeah, I mean, I think you've seen the Venn diagram, you know, if you cover all the kidney centers, the 220 plus, and you pretty much cover everything that's above and below diaphragm. And I think, you know, for us, it's, you know, you don't have to expand or go into different centers as a result of that. What I can say is that having this pan-organ approach is something that's really special. I've been out in the field the last couple of months, and, you know, at each of these different, you know, center meetings I attend, they are pan-organ experiences, so I do think there's an increasing recognition, particularly as we now bring lung, we have the above diaphragm, the heart-lung sort of story, as well as the below diaphragm, which is kidney and liver, and I think I'd think of it those two ways, but certainly there's existing synergies and efficiencies because it's already present in the above and below diaphragm. It makes it a very high efficient way to deploy our team, but more importantly, we just have such a strong presence. The offerings that we have allow for that cross-portfolio usage, whether it's the Otter, whether it's the TransChart, whether it's the AlloCare, whether it's the waitlist management, whether it's other offerings that we have in development as well. You're absolutely right. There's a very concentrated pool of centers and, you know, relationships that we've been able to build upon.
spk11: Great. And just a final question from me. Can you talk about your work with Histomap and Euromap and development progress there and when we could expect to see those products?
spk08: Yeah, Euromap is in development as well as Histomap. I mean, I think they're both making really nice progress. I think Euromap's more on the ClearLab side at this stage, and Histomap's still more on the development stage. But both are on track from what we had sort of internally have in our timelines, but these are exciting offerings that we already have in place in terms of looking at our multimodal studies. So Histomap, for example, is being used in a couple of different studies as part of that multimodal approach that we're using as well.
spk11: That's great. That's it for me. Thank you.
spk08: Thanks very much, Ma. Thank you.
spk05: Our next question comes from Yai Chen with HC Wainwright. Please go ahead.
spk03: Hi. Thank you for taking my question. Looking at the revenue of 2020, the first half represents about 42% of the total 2020 revenue, and The first half of 2021 revenue already represent 50% of the midpoint of your guidance. So can you comment on whether you are being conservative about your revenue guidance, or there's some other elements in the second half of this year that we should consider that may potentially slow growth? Thank you.
spk07: Thank you, Yichen. Yeah, good observation there. I think the only thing I would say is the seasonality last year had COVID impact both in the first half of the year and then second half as we built and rolled out RemoTrack, which was hugely beneficial for the patients and for us. It gave a nice pickup in the business in the second half. So the point being, last year's seasonality in the half one versus half two was quite unique for the year that it was. This year will play out on its own seasonality.
spk03: Got it. Thanks. And also, could you comment on what percentage of lung transplant patients are covered by Medicare?
spk07: About 25 to 30%. Okay.
spk03: Thank you.
spk05: Ladies and gentlemen, we have reached the end of our question and answer session. I would now like to turn the call back to Reg for closing remarks.
spk08: Thanks very much. I want to thank everyone who's on the call today really for taking interest in what we do as a company. I mean, at the essence, what we do is really how do we help transplant patients? And I think having analysts and investors who take interest in covering us but also listening to what we do is a real privilege and honor. And I just want to thank each and every one of you for taking the time. We have a really important goal as a company, and the more that we can help and support patients, the more that we think we're contributing to our overall mission. So thank you again, and I hope you all have a great rest of the day. Thank you. Bye now.
spk05: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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