CareDx, Inc.

Standby, we're about to begin. Good afternoon, everyone. Welcome to the CARE DX Incorporated fourth quarter and fiscal year 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during our question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone. Also, today's call is being recorded, and if you should need any operator assistance during the call today, please press star 0. Now, at this time, I'll turn things over to Ms. Caroline Corner, Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Good afternoon. Thank you for joining us today. Earlier today, CareDS released financial results for the year ending December 31, 2024. The release is currently available on the company's website at www.caredex.com. John Hanna, President and Chief Executive Officer, and Abhishek Jain, Chief Financial Officer, will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of the federal security 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 historical 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, SNAP plays 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, February 26, 2025. 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 John.

Thank you, Caroline, and welcome to everyone joining today's call. In early January, we preannounced our fourth quarter and fiscal year 2024 financial results, highlighting what was a transformational year for CareDX. I want to start by congratulating the approximately 650 employees globally at CareDx for supporting the care of transplant patients from the early stages of establishing a donor to recipient match all the way through post-transplant monitoring, sometimes for the rest of the patient's life. We impacted the lives of over 50,000 patients in 2024, and in 2025, look forward to continuing to deliver on our mission to create life-changing solutions that enable transplant patients to thrive. In the fourth quarter, we reported quarterly revenue of 86.6 million, up 32% year over year. Positioned to build upon that performance, we reiterate our 2025 guidance of 370 million in revenue and our target to exit 2027 with 500 million in revenue and 20% adjusted EBITDA. At CareDX, we continue to drive gains in positive adjusted EBITDA due to revenue growth and disciplined management of our operating expenses and achieved $9.8 million in adjusted EBITDA in the fourth quarter and $27.8 million for the full year. We generated $22 million in cash from operations in the fourth quarter and ended the year with a cash balance of $261 million and no debt. We are committed to long-term profitable growth, and in 2025, we expect an adjusted EBITDA gain of between 29 and 33 million. I'm going to highlight several accomplishments from the fourth quarter, and then turn to the key growth drivers for 2025, which you should anticipate hearing from me, providing further commentary on throughout the year. In testing services, we delivered approximately 45,500 tests in the fourth quarter, up 14% from the prior year. The fourth quarter was our sixth consecutive quarter of sequential testing services growth. We again experienced testing services volume growth across all organs, heart, kidney, and lung. Testing services revenue was 63.8 million for the fourth quarter, up 37% year over year. We completed our plan to add 30 sales and marketing team members to promote and sell our transplant solutions. We also completed the addition of 20 team members to our billing organization to drive greater collections and expand our ASP. We will continue to invest in our commercial operations where we see an outsized opportunity to drive growth by further penetrating the market. We continue to make strides in payer coverage. In the fourth quarter, we expanded Allomat heart coverage from beginning of month six post-transplant to month two post-transplant by 21 million commercial lives and added 12.2 million new commercial covered lives for AlloSure. For the full year of 2024, we added or expanded coverage for 28 million lives for Allomat heart and added 36 million new commercial covered lives for AlloSure. This coverage and disciplined revenue cycle management will continue to drive our ASP in future quarters. Moving on to our patient and digital solutions, which includes our transplant pharmacy, software tools, and remote patient monitoring services, we reported revenue of approximately $11.4 million in the fourth quarter, representing 18% year-over-year growth. We continue to see strong synergies between patient and digital solutions and our testing services offerings. When accounts use three or more CARE-DX patient and digital solutions, they have a 50% greater new patient capture rate for our testing services. In the fourth quarter, our digital solutions team, in collaboration with our partner Leidos, was awarded a contract by the U.S. Department of Health and Human Services that provides us the opportunity to bid on projects associated with the Organ Procurement and Transplant Network, or OPTN, modernization initiative. This multi-year initiative aims to modernize the data collection, reporting, organ allocation, and other facets of the organ transplant system to better serve the more than 100,000 individuals on the national organ transplant wait list. This partnership leverages CareDx's deep expertise in transplant software development, data science, and AI, and Leidos' experience in health systems and large-scale health IT programs. We are proud to be a part of this initiative, which has the potential to expand access to organ transplants. Moving on to lab products, which includes PCR kits for rapid deceased donor HLA typing and NGS kits for transplant recipient HLA typing globally. and IVD monitoring assays for solid organ and stem cell transplant recipients outside of the U.S., we reported revenue of $11.4 million, representing 23% year-over-year growth. Sales of our industry-leading Aliceek TX NGS-based HLA typing kits for organ recipients primarily drove this growth. In December, the results of a multicenter prospective study of our Alloseq cell-free DNA IVD kit, which included 580 transplant patients from three referral centers in Europe, was published in the journal Transplant International. The study demonstrated that Alloseq cell-free DNA detects allograft rejection consistent with our Allosure donor-derived cell-free DNA lab-developed test in the U.S. Today, Approximately 5% of CARE-DX revenue come from outside the U.S. However, there are over 18,000 kidney, 2,000 heart, and 2,000 lung transplants performed annually across the European Union alone. We look forward to these data expanding adoption of allocyte cell-free DNA for detecting allograft rejection in the same labs that use our industry-leading ALICE TX17 NGS HLA typing assay. The transition to NGS in HLA labs globally for HLA typing and the detection of allograft rejection will continue to drive growth in our lab products business. 2024 was a truly transformational year at CARE-DX, and we believe we are well-positioned for continued profitable growth in 2025. I now want to highlight what we view to be our key drivers of growth in 2025 that enable us to achieve our three-year long-range plan and that we've laid out in our presentation. Number one is our go-to-market strategy to provide solutions to transplant centers across the care continuum to drive testing services volume growth. Our pharmacy, digital, and lab products are synergistic to growing our testing services adoption. Number two, evidence generation to expand payer coverage. We continue to demonstrate the testing services we provide improve patient health outcomes and provide significant value to the healthcare system. Evidence generation, coverage, and coding allow us to achieve in-network status and improve payment and ASP. And number three, operational excellence to scale our business profitably. including business process optimization, which allows us to have revenue growth, outpace operating expense growth, and generate cash. Throughout 2025, we anticipate achieving significant milestones in each of these areas. First, in go-to-market strategy, through our synergistic offering of our patient and digital solutions, we anticipate continued adoption and surveillance testing with Allisher Kidney, namely, The IOTA program, which we anticipate will be implemented by CMS in July of 2025, is the current focus of most kidney transplant centers nationally. The program provides both upside and downside risk payments for transplant centers. The two program metrics of importance are growing kidney transplant volumes and the organ acceptance rate at each center. Both of these metrics may drive centers to perform more complex transplant cases, which may increase the risk of rejection. These patients may require more regular monitoring, which we believe AlloShore Kidney is well positioned to support. Each performance year of the IOTA program is assessed independently, so it is crucial that a transplant center understand their IOTA score in real time. CareDx's upcoming release of our quality reporting software, ZinQAPI, is designed to specifically allow transplant centers to monitor their IOTA performance score in real time with no manual data entry required. This digital tool is an example of how our synergistic solutions are enabling sales engagement around expanding the use of our Allisher surveillance testing services and is anticipated to be released prior to the July 2025 start of the IOTA program. Another example of our patient and digital solutions that are driving engagement in kidney surveillance testing is the anticipated launch of our medication therapy management program through our CARE-DX transplant pharmacy. A key reason why transplant patients undergo organ rejection is the lack of adherence to their immune suppression medications which are often the result of symptoms of drug-to-drug interactions. The cardiac transplant pharmacy is launching a medication therapy management program in the first half of 2025 to support those patients, in particular individuals with a less-than-ideal allograft match that are on a higher dose of immune suppression medication with greater side effects. In addition, we intend to launch several new products this year, including in testing services, Alloshore Heart for pediatric patients under the age of 15, Alloshore Kidney for simultaneous pancreas and kidney transplant patients, which is primarily performed for patients with insulin-dependent diabetes and renal failure, and our Histomap Kidney Assay, a gene expression profiling test for determining molecular subtype of organ rejection such as antibody-mediated rejection. In our patient and digital solutions, we intend to expand the launch of AlloView, an AI risk prediction model for kidney allograft rejection. And in lab products, we plan to provide commentary on the ongoing launch of our assigned 2.0 software that pairs with our AlloSeq TX17 NGS assay for HLA-typing, and later in the year, the launch of SCORE7, our next generation software for rapid PCR HLA testing. Moving to evidence generation, I will start with kidney. In the fourth quarter, study investigators submitted the first of several anticipated manuscripts from the K-OR Registry, a long-term follow-up study of nearly 4,000 patients who underwent kidney transplantation. We anticipate those data will be published in the second half of 2025. And the second KOR manuscript is expected to be submitted in the second quarter of 2025. The major conference in kidney transplantation and additional abstract data that will lay the groundwork for future publications occurs in August of this year, the World Transplant Congress in San Francisco. In heart, we anticipate the second manuscript from the SURE registry to be submitted in the first half of 2025 and to be published in the second half of 2025. And in lung, we expect the manuscript to be submitted for publication in the second half of 2025. The International Society for Heart and Lung Transplantation or ISHLT meeting is taking place in April 2025. where we expect data presented in abstract form to drive future publications in heart and lung. These data in kidney, heart, and lung will be the catalyst for additional commercial payer coverage for Allishore as we continue to build the evidentiary library that demonstrates Allishore testing changes clinician behaviors and improves patient health outcomes in each indication. Switching to our pipeline, and CARDI-X's alaheim assay for hematologic malignancies. An interim one-year readout of the two-year alaheim acrobat trial to monitor for minimal residual disease recurrence for patients with hematologic malignancies that have undergone an allogeneic stem cell transplant was presented at the tandem cell transplant and cell therapy meetings last month. These interim data demonstrate allogene detects relapse, a clinically meaningful time ahead of standard of care approaches. We anticipate further interim readouts of this trial throughout 2025 at scientific conferences. These data supporting allogene will build the foundation for our future Medicare coverage submission following the completion of the Acrobat trial in 2026. In operational excellence, we are improving our enterprise infrastructure and business processes to operate more efficiently, such that revenue growth outpaces operational expense as we scale. We have rebuilt our revenue cycle management team and look forward to seeing the impact that may have on ASPs in future quarters. And a key initiative in our supply chain operations is to increase the gross margins of our lab products business. If you recall, as a first phase, we transitioned Alice's TX17 manufacturing from Fremantle, Australia to contract manufacturers in the US and EU to reduce COGS. And we now are taking additional steps in supply chain and manufacturing processes to improve our gross margin profile by the end of 2025. And with that, I will now turn the call over to Abhishek to share more details on the fourth quarter and full-year financial results in 2025 guidance.