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spk09: Good day and welcome to the CARE DX first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ian Cooney, Vice President, 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 March 31, 2022. The release is currently available on the company's website at www.caredx.com. Reg Seto, 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 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 included 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, May 5, 2022. CARE-DS CARE-DX disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. This call will also include a discussion of certain financial measures that are not calculated in accordance with the 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.
spk03: Thanks, Ian. Good afternoon, everyone, and thank you for joining us for CareDx's first quarter 2022 earnings call. The first quarter was a tale of two contrasts, where January was the lowest month in transplant volumes since April 2020, while March was our highest ever month in patient test results in testing services. With that in mind, I'd like to provide the following highlights for the quarter. Number one, delivery of a strong revenue quarter achieved in spite of the slow start to the year for the testing services and the product's business line. Number two, accelerating performance in patient and digital solutions driven by our recent acquisitions. Number three, extending our scientific leadership with real-world, multi-center, prospective, and long-term data generation. Four, help ensure that the transplant community receives accurate information about our tests after a jury found that Natera's superiority claims were false and awarded CareDx $44.9 million in damages. And five, leading with innovation in artificial intelligence and xenotransplantation and taking responsibility as a transplant company to increase equity in transplant. Now on to performance. We recorded our highest ever revenue quarter in spite of a slow start. Q1 marked the third consecutive quarter of flat to negative sequential transplant volumes with January and early February most notably impacted by Omicron, followed by a strong rebound in March. With no sequential transplant volume growth for three straight quarters, we hope transplant volume declines have hit a nadir, and the Q2 will reverse this volume trend. Note, our transplant volume numbers are based on the full month of UNOS data versus weekly data, which are directional, until the full month of data becomes available. Now for kidney testing services, we continue with our winning formula of adding AlloShore name protocols, adding new centers, and expanding further into community nephrology. At the end of March, we have more than 80 AlloShore kidney protocols in commercial use. Offsetting the fewer transplants being done, we had our second highest quarter with AlloShore volume in community practices. The peak Omicron wave had an acute impact on our kidney testing services, including staff shortages in transplant centers. However, I'm pleased to report that March, we set a record for testing services volume. On the pipeline side, we're excited in progressing the next wave of innovation in the kidney space. For Allomap Kidney, another recent publication confirmed the clinical validation of Allomap Kidney using data generated in the validated clear workflow from samples in the OCRA study. For heart and lung testing services, the heart care attachment rate was over 95% continuing to highlight the value of multimodality to physicians. We're also pleased to run over 900-hour short lung tests in its second quarter since launch. At ISHLT, the largest heart and lung transplant conference in the world, the full force of CARE-DX was on display, with the highest number of industry presentations, and with my appointment as the corporate chair for the ISHLT Foundation, and with our board member, Dr. Hannah Valentine, being awarded the prestigious Lifetime Achievement Award. On to the second topic. We accelerated performance in our patient and digital solutions with first quarter revenues of 6.2 million, driven by our recent acquisitions of MedAction Plan and the TransLand Pharmacy. Our AlloCare app now has more than 17,000 users and serves as the foundation for digitally connecting patients across the TransLand journey. We have expanded this functionality by incorporating TX access into this AlloCare app to now help pre-transplant patients navigate the waitlist process as we digitally connect patients across the patient journey. We are thrilled to have built this de novo digital business over the last three years and have started to scale with revenues. And these revenues are now comparable to our products business line, which achieved $6.8 million in revenue in Q1. On the third topic, we further extended our scientific leadership during Q1. with real-world data generation across kidney with Admiral, heart with Shaw, and lung with our multicenter lung study. In kidney now, the Admiral publication showed Alloshaw as the first and only donor-derived sulfurase DNA test with demonstrated long-term utility in both surveillance and full-course testing. Alloshaw also demonstrated a greater than 60% improvement over creatinine in the accuracy of identifying rejection. By contrast, our competitors have not been able to come close to showing this magnitude of improvement over standard care. In heart, SHORE, our multimodal registry with our FDA-cleared Allomap and our leading donor-derived sulfonate test, Alloshore, has shown higher one-year survival compared to UNOS statistics. This is the largest heart transplant data set, which has shown increased clinical utility, showcased at this year's ISHLT. Heart care helps improve clinical decision-making And we're excited to hear that the new ISHLT draft guidelines are considering including donor-derived sulfonamide in addition to Alimab. As a reminder, we are the only covered multimodal transplant approach covered by Medicare. In lung, our multicenter Alloshore Lung Clinical Utility Study was published in JHLT. This real-world experience in partnership with NIH was conducted during the COVID pandemic. This Alloshore lung surveillance resulted in an 83% reduction in invasive bronchoscopies compared to a surveillance bronchoscopy program. Importantly, Alloshore identified subclinical graft injury in patients where there was no clinical suspicion. Number four, moving on to false advertising case against Natera, where we received a positive jury award in our favor of $44.9 million, including $21.2 million in compensatory damages, and $23.7 million in punitive damages. While post-trial motion practice is ongoing, our council believes this to be one of the largest damages awards in a false advertising case in our space. We believe this speaks for itself. While new opportunity entrants focused on short-term path to profits have been aggressive with their approaches and comparisons to our tests, we believe it's important to build and maintain trust by investing in science and proper studies. As a leader in the space, it is our obligation to patients to call out companies that intentionally mislead the transplant community. On to the fifth topic. As the transplant field evolves, CareDx remains at the forefront of driving innovation. We believe the future is multimodality, and artificial intelligence, or AI, is a core part of that innovation. In kidney, we've invested in algorithms, including iVox. with prognostic data published in the leading journal, BMJ. In heart, we just announced last week at ISHLT our partnership with Organ-X developing AI algorithms, including in identifying cardiac allograft vasculography trajectories, also known as CAV, with prognostic data published in the leading journal Circulation. In the exciting world of xenotransplantation, we were proud to be partners with the University of Maryland School of Medicine on the world's first successful pig-to-human heart transplant. We're now providing our Xenashore and Xenomap biomarkers in supporting xenotransplantation research and development. In cell therapy and stem cell, we continue to make progress with four presentations of new data at the recent tandem meetings of transplantation and cell therapy meetings of ASTCT and CIBMTR, covering Allocell, Alloheem, and Otocela. Finally, as a transplant company, we are focused on equity in transplant. We have national efforts with the Minority Organ Tissue Transplant Program, also known as MOTEP, and regional initiatives, the most recent being the Pluralist Initiative, where we partnered with UC Davis Health to improve awareness and education about organ transplant in underserved communities throughout California. I want to summarize that our core focus is testing services. We have a robust-based business, as we have now faced three consecutive quarters of negative to flat transplant volume growth. We hope we've hit the nadir with transplant volume declines. As transplant volumes improved in February and March, we saw our strongest testing service results for heart and kidney in the month of March. We have a focused strategy, and over the last 18 months, we've been pleased with the continued introduction of new catalysts from AlloShore Heart to AlloShore Lung, and our latest focus is Allomat Kidney, which is in late development. We're also pleased with our expansion of community nephrology and the creation of dedicated abdominal and cardiothoracic teams. Now, outside testing services, we continue to scale in both the products and digital businesses and see growth built off new launches with the AlloSeq franchise and now executing on the recent acquisitions for the patient digital solutions. Beyond our current commercial business lines, we're building the long-term future by investing in areas of disruptive innovation with the development of offerings in artificial intelligence as part of multimodality, stem cell and cell therapy with AlloHeem and AlloCell, and Xeno Transplant Field with XenoSure and Xenomap. We look forward to building this incredible company focused on the transplant patient and community. With that, I'll turn the call over to Ankur to discuss our first quarter financials.
spk05: Thank you, Reg. Hello, everyone. We are pleased to deliver another strong business and financial performance despite the backdrop of continued difficult market conditions during the first half of Q1 2022. Let me provide you the details. We recorded total revenues of $79.4 million, up 18% compared to $67.4 million in the first quarter of 2021. Testing services revenue increased 12% year-over-year to $66.4 million. Testing volumes grew by 29% to approximately 42,600 tests, including approximately 900 lung tests. We saw sequential declines in testing volumes in January and early parts of February before strongly rebounding in March, when March was our highest month ever for testing volumes for heart and kidney. We continue to see strong adoption of our newly launched tests, Alloshore Lung and Alloshore Heart, with heart care at greater than 95% attachment rate and Alloshore Lung approaching use in one in two transplant centers in less than six months of launch. Our testing services volume growth has and will continue to exceed our revenue growth as we're in the process of new launches with Alloshore Heart and Alloshore Lung. We are in the process of increasing the coverage to levels we have achieved in allomap and alloshore kidney. This provides a significant opportunity for future revenue upside as we build out our commercial coverage in these new launches. Today, alloshore lung is only at less than 5% coverage and alloshore heart at approximately 25% coverage. Although we look at ASP by test offering, We understand some investors may look at revenues divided by total tests. This aggregate average price declined by about 4.9% versus last quarter of 2021. This decline came from three factors. Higher growth in patients with commercial insurance across all organs, where we have lower coverage today. Changing volume mix between organs, with strong success of alloster heart and alloster lungs, where we have lower coverage today. Continued increase in Medicare Advantage patients in our kidney services. Specific now to kidney, although the majority of patients are under Medicare, we have seen an increase in number of patients outside Medicare, which is specifically impacting AlloShore kidney realized prices. This mixed shift has come from two areas. First, Execution of our strategic plan to focus on community nephrology over the last 12 months, which has increased the number of patients on commercial coverage. This is expected to continue as a core part of the growth strategy. The second has been industry shift from Medicare to Medicare Advantage plans, proven by the 21st Century Cures Act. As a reminder, it takes longer to collect the Medicare Advantage plans and requires additional administrative steps, including prior authorizations. All these represent upside opportunities for us. Overall, our go-forward plan is, first, increasing payer coverage in current offerings, including the new launches, to positively impact our revenues. Notably, for Allishore Heart, cell-free DNA is under consideration for inclusion in ISHL-T guidelines. We are excited by this potential inclusion in guidelines, reflecting the excellent data the team has generated. We're also excited about our upcoming OCRA data readout at ADC next month. Second, investing in infrastructure and capabilities to improve collections, especially from Medicare Advantage plans. Moving on to products, our first quarter product revenue increased 17% year over year to $6.8 million. driven by continued strength of our NGS portfolio. It was partially offset by headwinds from Omicron in the earlier part of the quarter. Our digital and patient solutions revenue was $6.2 million, up 164% year over year. Saw very strong performance from our newly acquired medication adherence businesses of MedAction Plan and the Transplant Pharmacy. We're excited about this early success as we scale our digital business through organic and M&A investments. The non-GAAP gross margins for the quarter were 67.9% compared to 70.2% in the first quarter of last year. Non-GAAP gross margins declined primarily in our patient and digital solutions business with the addition of newly acquired businesses. The transplant pharmacy business has a different business model with lower gross margins but has positive EBITDA, hence accretive to both top line and bottom line. Non-GAT operating expenses for the first quarter were $60.5 million, up approximately $4 million sequentially from Q4 of 21. This increase in expenses was driven by investments in R&D and commercial, where we added resources in our clinical and research teams, as well as commercial resources with dedicated cardiothoracic and abdominal teams. Our legal expenses increased tied to the false advertising trial where we received a positive jury award in our favor of over $44 million. As mentioned in our last earnings call, we expect legal expenses to remain elevated this year. For the first quarter of 2022, we recorded negative adjusted EBITDA of $5.6 billion, compared to adjusted EBITDA of $7.6 million in the first quarter of 2021. Adjusted for the elevated legal expenses I mentioned, our business generates near-break even to positive EBITDA. Turning to cash flows, our net cash outflows for the quarter were $29 million, ending the quarter with cash, cash equivalents, and marketable securities for $319 million. In Q1, We typically pay out our annual cash bonus to employees, which results into net operating cash outflows. In addition, we're nearing completion of expansion of our CLIA lab in Brisbane, which provides additional capacity for current tests as well as those in the pipeline, like Allomap kidney. Regarding the information request from the government, we do not have any material updates to report. We are cooperating and moving expeditiously in responding to the requests. Turning to guidance, we are reiterating our full-year guidance of $330 to $350 million of revenue. As you recall, the lower end of the guidance reflects continued disruptions in transplant volumes, as we saw in the early part of this quarter. This low end also reflects potential increase in the pace of shift of patients to Medicaid Advantage plans. The high end reflects continued market penetration model built on increased adoption and protocols, and a strong rebound in transplant procedure volumes after three quarters of sequential declines. Overall, I'm pleased by our performance despite the COVID-induced weaknesses in the early part of the quarter and three consecutive quarters of declines in transplant volumes. Our tests are on a strong adoption curve. In addition, we have a very strong business model, margin profile, and balance sheet position. Including elevated legal spend, the business generates positive EBITDA. We also have a large opportunity for commercial coverage and are excited about discussions related to inclusion of CFDNA in guidelines. And our new acquisitions are making strong contributions. Very excited about our future. With that, I will open the call for questions.
spk09: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brandon Couillard with Jefferies. Please go ahead.
spk11: Hey, guys. This is Matt. I'm for Brandon. Thanks for taking the question. I guess first, I want to appreciate the comments and the prepared remarks, but it's been a little over a month since you won the false advertising lawsuit against one of your key competitors. I'm curious if you could just expand a little bit on any shift in dialogue since then, you know, what's kind of been the response there in the market, and if you're seeing any shifts from a commercial perspective. Thanks.
spk03: Yeah, I think for us, we've built an excellent reputation with the transplant community over the last two decades, which is built on really excellent scientific data and how we work with different centers. And I think when this jury verdict came out, I think it was really a reaffirmation of what we represent as an organization to the transplant community. And I think the damages themselves speak to, I think, the implications. And so I think it was pretty clear-cut from that perspective.
spk11: Great. And then you commented on the March trends being the highest for both heart and kidney. Any comments you can give as we move through April here? And I guess, you know, what kind of gets transplant volumes back to normal after three straight quarters here of, you know, flat to down growth now that hopefully the COVID waves are behind us?
spk03: You know, I think it has been, you know, tough, you know, three, you know, sequential quarters. And I think we were, it was good to see some improvements. And we hope it's the nadir of what we've seen in the transplant space. And I think for, you know, the first four weeks is still relatively early. But I think clearly given how low January was, if you compare it to January, it's much better than January if you look at the month of April. But, you know, we can change them on this trend. But what we can say is that March certainly was our strongest month on record for both heart and kidney.
spk11: Great. And then last one, I know it's a smaller piece of the business, but the digital solutions, 6 million or so in here in one cube, if I can annualize that, I get to 25 million. What's the right number we should be penciling in for that business for 2022 with some of the newer acquisitions being layered in? Thank you.
spk03: Yeah, we're excited that over the last three years, we've built a DeNovo business pretty much from scratch. And it's been one where it's been very strategically thought out. And we've seen Yeah, progressive traction. I think we've had some good numbers this quarter by the patient digital solutions. I think we'll continue to see how that progresses during the course of the year. I don't know if there's any comments that you want to make, Ankur, at all.
spk05: Yeah, we were super pleased about the performance here, Matt, and we just want to see it sustain over a period of time before we can give you a color on what to guide.
spk10: I appreciate that. Thank you.
spk09: The next question comes from Alex Nowak with Craig Howell Capital. Please go ahead.
spk02: All right, Greg. Good afternoon, everyone. It was another big deterioration in price this quarter. We knew there was still going to be some Medicare Advantage changes that had a flush through, but I would say there's a pretty big change quarter over quarter. So what particularly new happened in Q1 to reduce that accruals per test? And I guess when did we reach a point where the ASP declines are going to stabilize and you can start to see them reverse?
spk03: Yeah, I'll make some comments. I'll pass it to Ankur. I mean, I think as we look at this shift in PayMix, I mean, there are a couple of areas that we see. First is the highest increasing number now of commercial patients across all organs has been a change for us. The second is obviously the new launches, particularly now with lung coming on board as well. And the third, we've talked a bit about the MA shift, which Ankur will go a bit more in details. But these have been the three primary drivers with the change. I'll hand over to Ankur.
spk05: Yeah, so Red summarized the three main drivers there, right, as we've seen in the latter part of last year and also in this part now. The thinking in General Alex there is, as we had said during our previous earnings call at the end of the year, is that we're anticipating this decline to continue through this year, specifically more acute in the first half. as more and more patients continue to shift. There are secular changes happening both in the market as well as our business where more and more patients are shifting towards either commercial or MA plans. In terms of our go-forward plan, there are two tangents to it. One is continue to work with the private payers on commercial coverage. Very pleased with some of the upcoming discussions here, potential with ISHLT. And then we continue to build infrastructure of improving the collection rates with the Medicaid Advantage plans. Our thinking is what will take us this year to work through this infrastructure, and we'll see some results until the latter part of the year, specifically for the Medicaid Advantage plans. You may have also noticed the more recent public news around the Medicaid Advantage plans and the challenges that the industry is facing. So we're working through that and putting our piece of the infrastructure there.
spk02: I just want to make it clear, when you are getting paid, you are still getting paid a similar rate as you would have last year or the year before on the volume. And I guess, would the company ever provide a volume number of tests that are currently being paid just so we can have a more apples to apples comparison?
spk05: Yeah, when we sign agreements with our, when we sign our contracts, we do sign those contracts and receive payments for at or above what our agreements are. So just to be spirit of the question, we don't discount our pricing. We always sign contracts at or above the Medicare rates. In terms of second part of your question, yeah, we've considered some information we had shared during our Investor Day, and we'll give more color around the mix of how the mix of our commercial volume has been increasing over the last few years. We'll give you more color on that.
spk02: That's helpful. And then the company's always had, I would say, a very strong earned leverage potential given the focus on the 250 transplant centers or so and then plus the community piece. But we haven't necessarily seen it turn into a profit. We've been closed but never quite got there. So I'm curious, when do we get to that point where we turn the switch and start to let some of the volume turn into profit? And why, I guess, why won't the legal spend actually roll down now that the jury trial has finished?
spk03: I might just make a quick comment on the profitability piece. I think, you know, as we've If we stay just with AlloShore kidney or with Allomap, I think, you know, we have really strong, you know, margins greater than 75%. We have operating margins in the 20 high range there as well as we'd previously talked about when we were at scale. I think the difference here is now we've moved into other organs where we have lower coverages and also, you know, that's a part of, you know, investing and growing. I mean, I think we are not just focused on one area. We need to be a company that expands and has, you know, future scale moving into lung, moving into liver, and then also as we think of the future pipeline, particularly, you know, areas of disruptive innovation such as Xeno or looking into, you know, cell therapy. But I will move over to Ankur to answer the rest of that question.
spk05: Yeah, I think that's from a business model perspective. That's the main thing that the tests that have scaled that business model is actually profitable. We continue to build on our strong market position to keep expanding into the other organs. And you see that in our increased R&D spend. You increase that in continued investment in the commercial side. Now, certainly, commercial coverage will drive a very strong operating leverage, and we'll certainly have that. In terms of second part of your question around the legal spend, we still do have several matters, even though the trial has completed. There's still several matters of various kind that will continue to remain open for the year, at least for the current year, and we don't guide for future years yet. But for 2022, I'm anticipating that this will remain at elevated level.
spk02: Okay, and then just lastly, what was the acquisition benefit for revenue in the quarter?
spk05: As we mentioned, if you look at our digital business, which was up 164%, a big part of that contribution came from the acquisitions.
spk10: Okay. Thanks for the update. Appreciate it. The next question comes from Andrew Cooper with Raymond James. Please go ahead. Sorry, left myself on mute there for a second.
spk04: Appreciate the questions. Maybe first, just one on the P&L. You know, we talk about The pricing dynamics, we talk about not necessarily having scale in some of these organs, yet when we look at the testing services gross margin, it actually ticked up about 100 bps sequentially. So just maybe give me a sense for what you're doing there to help offset some of these things, especially in a market where it feels like everybody else is talking about labor headwinds and cost of goods headwinds. What's working for you on the gross margin front?
spk05: Yeah, thanks for noticing that, Andrew, even though the headline goes marginally the other way. The testing services improved because we have two things that are going on there. On one side, we're adding into capacity where a new facility will go live potentially here in Q2, but we have strong operating effectiveness programs in place for our laboratory where we've been working on automating our laboratory production and movement of our test services, which has been driving very good operating leverage within the lab, both in terms of our current volumes and also in preparation for the newer tests like lung as well as potentially allomap kidney. We've been investing in some of the automation procedures there. That has helped us at least counter some of the inflationary pressures and be able to get in the healthy margin profile of that business.
spk04: Okay, great. And then just on the current business, can you give a sense for, you know, when we think about Omicron, what the impacts were, obviously to the transplant volumes, we can see that, but also to kind of more recent transplant recipients coming in versus maybe folks who were further removed from their transplant. Was there any discrepancies you could see on kind of who was showing up to clinics and how we think about that recovery, hopefully as overall volumes of transplants are coming back as well?
spk03: Yeah, probably, I think it's three areas. I mean, first, due to the Omicron impact, the first is on the transplant volumes, and that I think has been quite evident with the loss in January since the start of COVID at that peak. The second is actually the labor shortage across centers actually has almost to a T. We've spoken to, you know, the centers in the United States, and they all had sort of issues with, you know, staffing. We sort of impacted some of the areas where they could support us as well. And in terms of patient access, we've always been around this, Richard's study said about 40% for the mobile phlebotomy. So I think we've had good access there as well for, you know, during this time of Omicron and its peak. So I think, you know, as we see this recovery, probably the biggest disproportionate piece will be living donors on the kidney side. So as you know, 25% to 30% of the kidney volume is living donors. And I think during the peak and, you know, when we've had these ebbs and flows, that's the group that gets impacted the most, particularly with them having to do donor change, et cetera, and being deemed more of an elective procedure. So there, I think, you can see more of an uptick. And as staff, I think we mentioned previously, as staff come back, then there'll be a replica of what was done in the past where people may work on the weekends to do some of these procedures. But currently, that hasn't been the case because they'll still make up from the staffing shortages which have existed.
spk04: Great. Okay. Helpful. And then maybe just to sneak one last one in, even though it's not exactly a small question, but just what's the latest, you know, we saw the validation data you announced earlier this morning. So what's the latest timeline you can give us for allomap kidney potentially getting to mold DX and for consideration for coverage?
spk03: Yeah, I'll make some comments. I'll see if Ankur wants to say as well. I mean, we're really thrilled with allomap kidney. As you know, we've established this multimodal approach, firstly with Heart, and we're the only company with multimodal approval, and that's through demonstrating increased clinical utility. And I think that we've certainly done on the Heart side. As we look at kidney, it's been not just adding Allimate Kidney, but also looking at iBox, what we call this combination multimodality, which is something we're excited about. And so with Allimate Kidney, I think it's been generating what we call these clinical validation papers have been an important part of that process. So I think we're making good headweights in late development. I don't know if Ankur wants to weigh in anything additional. No, that's a good color, so well covered there, right?
spk10: Great, I'll stop there. Thanks again.
spk09: The next question comes from Matt Sykes of Goldman Sachs. Please go ahead.
spk08: Hi, this is Nick on from Matt. Maybe just kind of a follow-up to the last question. You know, any commentary on payer feedback or receptivity to some of the recent data, some of the OCRA data sets that you guys have published?
spk03: Yeah, I think that when you're talking about the recent data, you're talking, I don't think we've, the OCRA data, that'll come at ATC. We've published on the kidney side the Admiral data, and we've talked about the KL data, which is our long-term data. data on the kidney side. And on SHORE, what we just recently talked about was the long-term data for SHORE. And both these long-term studies showed the increased outcome of survival versus those using UNOS statistics. So I think you're referring to those two sets of data, right, versus OCRA?
spk08: Yes, yes.
spk03: Thank you. Yeah, so I think for us, I think particularly if we take firstly the hard side, What we've seen is, you know, I think Ankur may have alluded to it, and also myself, is, you know, we have our map on the international guidelines, and, you know, we were just ICHLP last week, and I think with the data we're generating and producing and working with, obviously, extensive centers and KOLs, there's consideration now for AlloShore, for example, or dendrites, so if you need to be incorporated into the guidelines. And, again, this is for consideration. For us, it could be another important milestone as we look at, you know, payer coverage in this space. And certainly, the team has made progress. We've seen that, you know, out of the gates, there are a couple of key accounts that signed up on the hard side, like Geisinger, et cetera. But I think with the potential guidelines, it was really exciting. On the kidney side, you know, our team has been built out under UNCA. And I think what we've seen here is, you know, the utility of the Admiral Tate has been well-received. and also care, which is long-term data. So these are the types of data which I think the payers request, which is long-term utility and also how it influences clinical decision-making. So we're really excited by the data that's being generated, and I think the team are really pleased to be the only company that has this sort of data to go out towards payers as well, particularly the long-term piece.
spk08: Got it. Thank you. And then, you know, you guys have talked about some of the investments you're making, whether it's, you know, in AI or some other related fields. Could you just maybe comment a little bit more on, you know, the SG&A ramp that we're seeing? You know, what are the impacts that you guys are having from that investment?
spk03: Yeah, I might make some comments and I'll hand over to Ankur as well. I mean, I think as we scale and build as an organization, you need to have an innovation hub, which is the R&D piece and As you look at the commercial execution, there's the SG&AP. So investment is a core part of what we need to do as an organization. We could always decide not to do it, but I think it would be remiss in this type of environment not to continue to grow as a company dedicated in transplant. So in terms of the SG&A side, what we've been doing, particularly the commercial side, is we've actually split out our field team to be in a dedicated above-the-diaphragm, below-the-diaphragm, so cardiothoracic and abdominal teams. And on the R&D side, we continue to invest in developing this pipeline. And some of the areas you mentioned, such as in AI, is critical. These are being licensed in, but there are other areas, such as Alimap Kidney, other organs, such as Alishore Lung and Euromap on Kidney. So we have a pretty extensive pipeline. This is really building for the future. I think it's easy to just focus on one successful offering, two successful offerings, three successful offerings. But you know, in terms of, you know, if you look at AlloShore, Allomap, and HeartCare. But for us as a company, it's really important to sustain ourselves by continuing to drive a pipeline, one that's built on innovation. So AI will form a core part of that. I know you called that out specifically. But I might have Ankur just comment on the specifics in terms of changes and spend that might be up.
spk05: Yeah, that's very well covered. Now, in terms of G&A, that's mainly between SG&A. I think the sales side, Reg has covered well. The G&A side, the two components, One, of course, is very large increase in the legal spend that we've talked about and remains elevated. And the second part is we are scaling the core infrastructure of the company in making sure we have the right systems and the procedures that are well-suited for a company both for our size and where we could be over the next two or three years or so.
spk10: Got it. Appreciate it. Thank you.
spk09: The next question comes from Yi Chen with HC Wainwright. Please go ahead.
spk06: Hey, congratulations. And this is Chet on behalf of Yi Chen. You guys have answered all of our questions. So maybe I was wondering if you could summarize all the upcoming catalysts for this year and any specific events that we should keep an eye out for. And the second question is, on Alocel and Elohim, any specific plans for this year, along with your digital solutions offerings? Thank you.
spk03: Yeah, gotcha. I think if I understood, I think you said any upcoming talismans. I didn't catch the full second question.
spk06: It was digital. Specifically on Alocel and Elohim, as well as your digital solutions, any short-term, long-term plans that we should keep an eye out for?
spk03: Gotcha. All right. Yeah, I mean, I'll take the latter first. I mean, certainly with, you know, building disruptive innovation, whether it's, you know, looking at Al-Sol, Al-Him, I'd encourage you to look at the full presentation we just delivered at the tandem meetings representing ASTCT and CIBMTR. And there we had both analytical validation for Al-Sol as well as for Al-Him. And these areas which, you know, we're investing for the future. And so I think We've also actively been enrolling in a study which is also shared at that presentation called the Acrobat Study, and that's for Elohim. So I think as you look at continued progress here, it's about partnerships where we can publicly disclose in addition to discontinued enrollment on Acrobat, and we'll provide additional commentary on that because enrollment is going extremely well. In terms of looking at some other catalysts we've talked about, I think ones we've talked about is that, you know, having, you know, UroMap and L-Map kidney on the kidney side has been, you know, areas to watch during the course of this year as we provide updates. If you think of specific scientific, you know, milestones, we just completed SHORE presentation, ICHLT, and in terms of ATC, which comes up in June, we'll be talking about the OCA readout as well. So these, again, the long-term studies looking at multimodality. This really is the way of the future, and I think generating long-term study data, which is from a multi-center prospective data set is what we do. And that allows us to continue to drive innovation but stay ahead of others because the clinical bar is being raised as well. So I think these are a couple of areas that you want to keep an eye on. We'll also share a bit more on now artificial intelligence. I think this is really, in some ways, the future of what the industry is moving towards. Not necessarily I've seen on the diagnostic side, but certainly as we look at the macro space, right, AI is such a core part of what can make a difference in many different industries and sectors. So I think our investment in artificial intelligence is core, and so we'll provide more of an update in that. We may actually do a potential innovation day as well as part of that. Typically, we talk about disruptive innovation, such as we did the Xeno transplantation day earlier on this quarter. So maybe more to watch out for on the AI side as well. Exciting future.
spk10: Excellent. Thank you so much.
spk09: The next question comes from Mason Carrico with Stevens, Inc. Please go ahead.
spk07: Hey, guys. Maybe just two quick ones for me here. I know allumab kidney is a ways off, but in terms of thinking about the initial attachment rate for that test, what are some key differences that should be taken into account and for maybe why it would be different than where Allisher Heart's attachment rate currently sits?
spk03: I think it's about clinical utility. So I think when you look at the touch rates, we believe that as long as you demonstrate clinical utility, then there'll be uptake. I don't think you'll find any other proxy or any other benchmark which is showing what heart care has done. And given what we saw in heart care, what we've done in kidney care is actually pretty similar, right, in terms of the technology in terms of designs, in terms of trying to understand what really matters to the physicians. And on top of that, we've also included iBox, which is a prognostic algorithm as part of that. So I think at the end of the day, what's really important, being a physician myself, is demonstrating utility. If it's not useful, then you really won't get that type of attachment. So I think that sort of speaks for itself. And that's why we've moved on to other algorithms as well and developed lung care and liver care as part of that sort of development process as well. You know, just as one final point, Mason, I mean, we developed this approach without knowing if there would be a reimbursement pathway because we believe at the end of the day, you know, the way you help clinicians is adding clinical utility and helping them in the decision making.
spk07: Got it. And then any updated thoughts on potential commercial payer wins for Allisher Kidney maybe this year and in 2023 do you have? the studies and evidence that you need to begin pushing on these payers, specifically for Allisher Kidney?
spk03: Yeah, I'll make a comment, and I'll hand over to Ankur as well. I think one of the questions just came up earlier, and what's the impact of some of these studies we're doing? I think, firstly, long-term studies are important because it goes beyond some of these short-term studies we've done. And we're the company that has that long-term data generation, whether on the heart or on the kidney side. And I think, particularly, the Admiral study was really helpful. as we look at demonstration of benefit with both for cause and also for surveillance as well. And so if I think of what we think is critical, generating the right data sets is important. And on the hard side, as we saw, having, for example, guideline changes can also be something that's incrementally beneficial as well. I'll hand over to Ankur to make any additional comments.
spk05: Yeah, and we've been having very good discussions with a lot of peers around, especially with the admiral data which provides the first long-term data on allo-short kidney. We have a plan with a large list of pairs that we're meeting with for the remainder of the year as well as going into early 2023. Certainly a front and center focus there.
spk07: Got it. Thanks, guys.
spk09: This concludes our question and answer session. I would like to turn the conference back over to Reg Seto for any closing remarks.
spk03: Yeah, thanks very much. I mean, at KDX, we're building a really special company, one that's 100% focused on the transplant patient. We've been doing it for more than two decades. And for us, it's really this unique ability to really be front and center in this space. And it's brought us attention, not only of the transplant community, but I think in patients and what we do for them day in, day out. So again, for all the investors on the line, thank you for your interest in this space. It really makes a difference to the transplant community, knowing that this is an area of focus for them. Thank you, and have a great day.
spk09: The conference has now concluded. Thank you for attending today's presentation.
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