CareDx, Inc.

Greetings and welcome to CARE DX, Inc. fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Greg Hadacek, Managing Director of Investor Relations. Thank you, sir. You may begin.

Good afternoon, and thank you for joining us today. Earlier today, CareDX released financial results for the quarter and full year ended December 31st, 2023. The release is currently available on the company's website at www.CareDX.com. Joining the call today is Alex Johnson, President of CareDX's Patient and Testing Services, Abhishek Jain, Chief Financial Officer, and Robert Woodward, Chief Scientific Officer. Also joining the call today is Michael Goldberg, Chairman of the Board. 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 meeting of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, are examination of historic operating trends, expectations regarding coverage decisions, pricing and enrollment matters, and our 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 description 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, February 28th, 2024. Verdex disclaims any intention or obligation 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 with the SEC. I will now turn the call to Alex.

Thank you, Greg. Good afternoon, everyone, and welcome to CareDx's fourth quarter and full year 2023 earnings conference call. CareDx ended 2023 in a solid growth and market leadership position after a challenging start to the year. Our team spent the last year addressing the complexities associated with the billing article, reconfiguring the company to adjust to the Medicare changes to coverage, and fighting to restore patient access to transplant innovation. Before we move into the details of the quarter and the year, let me step back for a moment and offer a bit of perspective. We are still in the early stages of a $6 billion market opportunity to help care for some of the highest need patients in the U.S. healthcare system. Transplant patients in the U.S. are experiencing incrementally improved short-term outcomes, but are still far away from having their newly transplanted kidney, heart, or lung last as long as it should. We continue to believe that effective care means truly understanding transplant patient management. And this requires focus from our entire team working closely with some of the world's best clinicians, researchers, and transplant centers. Our ability to successfully lead and execute in this growing market in the face of complexities associated with the billing article revisions is reflected in our results. Last year, we executed deliberately, quickly, and with high impact as demonstrated by our performance. We reduced our cost structure and stabilized our revenue base. Consistent with our pre-announcement, we reported full year revenue of $280 million, exceeding the high end of our updated guidance. We have regained our growth footing in our testing services business with patient test volumes up 4% quarter over quarter, an increase for the second sequential quarter in a row. We delivered about 40,000 tests in the fourth quarter, and patient testing services volume was approximately 165,000 patient results for the full year. We continue to make progress in driving our innovations into clinical practice. This year, we witnessed strong support from leading medical societies and from patients advocating for access to transplant molecular testing, including AlloSure and Allomap. underscoring the pivotal role our innovations play in improving transplant patient care. In 2023, two new Medicare coverage approvals supported the clinical value and market opportunity of our innovation pipeline. Allisher Lung was the first donor-derived cell-free DNA approved for coverage by Medicare for lung transplant patients. And with the approval of HeartCare in August 2023, our clinical approach of multimodality testing was confirmed by CMS. This approval defines a reimbursement pathway for our differentiated product portfolio, one that can leverage our rich pipeline of innovation to help improve patient outcomes. On the commercial payer side, we saw good progress. We ended the year with an additional 15 million covered lives. We expanded existing coverage for 31.5 million lives in our cardiothoracic business, primarily by adding coverage in the first six months post-transplant for Allomap Heart. Looking at our other businesses, we are pleased with a double-digit growth in both our patient and digital solutions and lab products business lines, representing year-over-year growth of 29% and 15%, respectively. Before moving on to 2024, I will touch on our recent patent litigation news. As we mentioned in our statement following a jury verdict in late January, CareDX was assessed damages of approximately $96 million. We intend to seek judicial review of the jury decision and monetary damages. We expect there to be active briefing on this matter at least through Q3 2024 in the District Court. The matter would then be subject to appeal to the Federal Circuit. Precise timing would be speculative, but we would expect any resolution for the patent litigation to be a multi-year, multi-step process.