CareDx, Inc.

Good day everyone and welcome to today's CARE-DX first quarter 2025 earnings conference call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note this call may be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Ms. Caroline Corner, Investor Relations. Please go ahead.

Thank you, Operator. Thank you for joining us today. Earlier today, CareDX released financial results for the first quarter of 2025, ending March 31, 2025. The release is currently available on the company's website at www.CareDX.com. John Hanna, President and Chief Executive Officer, Robert Woodward, Chief Scientific 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 on this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact 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 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, April 30th, 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 measures 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. We are broadcasting today live from Boston, Massachusetts, at the 45th Annual Meeting of the International Society of Heart and Lung Transplantation, where 60 abstracts, including 19 oral talks, were presented from data collected from over 90 transplant programs across the country on the use of CARE-DX solutions. To provide some context, there are approximately 170 health systems in the United States that have a heart or lung transplant program. That means novel data was presented this week on the use of CARE-DX products from approximately half of the heart and lung transplant centers in the United States. Later in the call, I will ask Robert Woodward, our Chief Scientific Officer, to share the highlights of several key abstracts. We made good progress against our drivers of growth in the first quarter of 2025. It was our seventh consecutive quarter of sequential testing volume growth. Our testing services grew across all three organs, heart, kidney, and lung. We launched two expanded indications for Allishore, made progress with publications, and continued to execute against our revenue cycle management and market access strategies. It has been a busy first quarter, and we are gaining momentum on delivering on our mission to create life-changing solutions that enable transplant patients to thrive. I'll now dive into some of the first quarter performance and progress against our growth drivers. In the first quarter, we reported quarterly revenue of $84.7 million, up 18% year over year, and a positive adjusted EBITDA gain of $4.6 million. Positioned to build upon that performance, we are reiterating our 2025 guidance of $365 to $375 million in revenue and an adjusted EBITDA gain of between $29 million and $33 million, and our long-range plan of achieving $500 million in revenue and 20% adjusted EBITDA in 2027. We ended the quarter with a strong cash balance of $231 million and no debt. In testing services, revenue was $61.9 million for the quarter, up 15% year over year. We delivered testing services volume of approximately 47,100 tests in the first quarter, up 12% from the prior year. Daily testing volumes increased in February and March and have continued through April, led by Allishore Kidney Surveillance Testing growth. Our increased sales footprint is having an impact, and I'm pleased with the progress we continue to make expanding kidney surveillance testing protocols. In March, we launched two expanded indications for Alisher testing. First, Alisher Heart is now the only test validated and commercially available for pediatric heart transplant patients under age 7, including infants. Expanding the clinical indication of AlloSure for this population is important because it allows us to service the entire market and shows our commitment to pediatric transplant programs. To frame this opportunity, over the past three years, there were approximately 500 heart transplants annually in patients under the age of 18. The second indication expansion is for AlloSure Kidney. which is now validated and commercially available for simultaneous pancreas kidney transplant patients. Simultaneous pancreas kidney transplants are primarily performed for patients with renal failure and insulin-dependent diabetes and is a growing indication because it cures both diseases in a single procedure. In 2024, more than 700 patients received a simultaneous pancreas kidney transplant. We also made strong strides with payers this quarter, executing against our market access strategy of publishing evidence, expanding medical policy coverage, and getting into payer networks. In the first quarter, we submitted the second manuscript from the SURE study assessing the use of heart care in the management of over 2,700 heart transplant patients at 67 centers in the U.S. As a reminder, We submitted the first manuscript from the CAOR study of over 3,600 kidney transplant patients from 56 transplant centers, and we anticipate these publications to contribute to heart care and Allishore kidney coverage in future quarters. In the first quarter, we added 3.5 million new covered lives for Allimap heart and 15.5 million new covered lives for Allishore testing. Early in the quarter, we were issued a new CPT code for Allishore that became active for use on April 1, 2025. And as a result, we converted six of our existing payer contracts to the new Allishore-specific code and were able to obtain in-network status with a new large Blue Cross Blue Shield plan in the southeast with over 3 million covered lives. We believe the combination of additional published evidence, Coverage gains and in-network contracts will lead to ASP gains in future quarters. I'd like to now turn it over to Robert Woodward to talk briefly about some of the important clinical evidence that was presented this week at the ISHL team meeting in Boston.

Robert? Thanks, John. As John shared, this year marks the 45th annual meeting of the International Society of Heart and Lung Transplantation, the largest scientific conference for cardiothoracic transplant each year. and CARDI-X products were featured in 60 abstracts, including 19 oral presentations and at least two ISHLT symposia in addition to our own CARDI-X symposia. As you may know, it is common for researchers to present the findings from studies at the annual ISHLT meeting in advance of writing up a full manuscript and submitting the findings for publication. Therefore, we view this large body of clinical abstracts as a strong sign of the future pipeline of journal publications to support both the growing clinical adoption and the payer coverage of our products. Now let's explore some of the most significant data in both heart and lung. I will start with heart care, which includes both Allomap gene expression profiling of immune activity and AlloSure donor-derived cell-free DNA assessment of organ damage. New outcomes data from the Shore study were showcased in five oral presentations out of a total of eight abstracts accepted by the conference from this one study. First, Dr. Nir Uriel, a principal investigator on the SHORE study and professor of medicine and director of heart failure and heart transplant programs at New York Presbyterian Columbia University and Weill Cornell Medicine in New York, one of the largest heart transplant programs in the U.S., presented an oral abstract session at a session demonstrating that heart care may be more predictive of clinical outcomes than the histopathological evaluation of biopsy specimens. On slide 7, we provide some of the data. These data show that a dual positive heart care result, indicating elevation of both immune activity and indicating organ damage, was prognostic for poor outcomes, a composite outcome of graft dysfunction, rejection, or death from rejection, even when the associated pathology review of biopsy was negative. Nearly 25% of patients with dual positive heart care and a negative biopsy readout had poor outcomes by 18 months post-transplant. These patients with dual positive heart care and a negative pathology review were nearly 50% more likely to experience these negative outcomes, such as death from rejection, than patients without a dual positive test. Importantly, heart care was prognostic of poor outcomes even when the pathology review of biopsy was negative. These new data demonstrate that heart care may be a more important predictor of health outcomes in heart transplant patients than histology evaluation of a biopsy specimen. Second, in a presentation delivered by Dr. Jeffrey Teutoburg, principal investigator on the SHORE study and a professor of medicine and section chief at Stanford University, it was shown that overall outcomes at centers using heart care were not associated with the number of biopsies performed at the center. This presentation, some of which is shown on slide 8, was really eye-opening for the attendees and was a result of an extensive analysis of biopsy practices across 43 of the largest participating SHORE transplant centers. The results indicated that these centers performed biopsies at varying frequencies, ranging from less than one biopsy every 10 months to nearly 10 biopsies every 10 months in the first year. Despite this variation, patient outcomes were not associated with the rate of biopsy, suggesting that the reducing biopsies in the context of using heart care has no negative impact on patient outcomes. Now turning to lung transplantation, we continue to see increasing adoption of Allisher lung across the country. Our observation in working closely with the physicians caring for these highly vulnerable patients is that the longitudinal use of Allisher lung is proving to be highly valuable. Dr. Sam White, Professor of Medicine and Director of Clinical Research for the Lung Transplant Program at UCLA, presented data from his institution during our Cardiac Symposium. Dr. White and his colleagues have focused on using personalized threshold for serial monitoring with Allisher to better identify rejection. By setting a personalized threshold based on a patient's Allisher lung longitudinal results over time, as demonstrated on slide 9, the sensitivity for detecting rejection improved over the use of a static threshold without an impact on specificity. The sensitivity improved from 50% to 75% in single lung transplant patients and from 46% to 85% in bilateral lung transplant recipients. The approach by Dr. White may lead the way in surveillance use of Allisher lung. These data complement those presented in a poster by the team at Tampa General Hospital, the institution with the largest number of total organ transplants in the United States last year. Their data, as described on slide 10, demonstrated similar utility for longitudinal assessment of Allisher lung. They analyzed the ability of Allisher lung to not only identify the onset of rejection, but also monitor treatment following the rejection event. Their presentation showed a 50% increase of Allisher lung from a prior test to the test in which rejection was identified and a decrease back down to that same level following treatment. This year's ISHLT was the largest ever and was a remarkable event for CARE-DX. We now look forward to the continued generation of outcome data and publications with these centers and the many others caring for transplant patients using CARE-DX testing solutions. Now I'll turn it back to John.

Thank you, Robert. It has been an exciting meeting. And we're looking forward to seeing some of these data begin to turn into manuscripts over the coming year. Before moving on from testing services, there are two additional topics I want to cover. Our testing services pipeline development and our efforts in operational excellence. First, this quarter we presented data on our Alloheme assay for hematologic malignancies at the Tandem Cell Therapy and Cell Transplant Conference in Hawaii and the EMBT or European Bone Marrow Transplant Conference in Italy. This data included an interim one-year readout of the two-year ACROBAT trial to monitor for minimal residual disease recurrence in patients with hematologic malignancies that have undergone an allogeneic stem cell transplant. These interim data from a cohort of 229 patients and 11 stem cell transplant centers in the U.S. demonstrate Alekheme detects relapse a clinically meaningful time ahead of standard of care approaches. These data supporting Alekheme will build the foundation for our Medicare coverage submission following the completion of the Acrobat trial in 2026. To place a greater emphasis on organic expansion and execution of our product pipeline, we have added Jen Foley as Chief Product Officer. Jen brings over 20 years of commercial and product experience from Genentech in the fields of immunology, oncology, cardiology, and neuroscience. In her role, Jen will lead our product strategy, early market shaping activities, and product development efforts to expand into hematology. I look forward to providing further updates on our pipeline in future calls. Lastly, in operational excellence, We are continuing to improve our enterprise infrastructure and business processes to operate more efficiently, such that revenue growth continues to outpace operational expenses as we scale. We are also announcing today that we have begun a significant initiative to integrate Epic Aura. We entered into this program with Epic, a leader in electronic health record software, to utilize Epic Aura to make it easier for healthcare providers to order our testing services. It is our goal that by the end of the year, transplant centers using Epic's platform will be able to order AlloSure and Alimap seamlessly through Epic Aura. Now, 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 12 million in the first quarter, representing 24% year-over-year growth. Our go-to-market strategy is working, and we continue to see our patient and digital solutions unlocking growth opportunities for our testing services offerings. On 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 $10.8 million, representing 26% year-over-year growth. Sales of our industry-leading ALICEQ-TX next-generation HLA typing kits for organ recipients continue to primarily drive this growth. In summary, we had a strong first quarter executing across all of our key drivers, including go-to-market strategy, evidence generation, and operational excellence. And now, I'll turn it over to Abhishek to share more details on our first quarter financial results. Abhishek?

Thank you, John. In my remarks today, I will discuss our first quarter financial results before reiterating our 2025 guidance. Unless otherwise noted, my remarks will focus on non-GAAP results. For further information, please refer to GAAP to non-GAAP reconciliations in our press release, earnings presentation, and recent SEC filings. Let me start with the key financial highlights from the quarter. We reported total revenue of $84.7 million for the first quarter, up 18% year-over-year. We delivered approximately 47,100 test results in the first quarter, up 12% year-over-year. This performance reflects the seventh consecutive quarter of sequential testing services volume growth. Testing services revenue was $61.9 million, up 15% year-over-year. Adjusted testing services revenue was $63 million, up 26%, year-over-year on a comparable basis, excluding $1.1 million in write-off for aged receivables. Patient and digital solutions revenue was $12 million, up 24% year-over-year, and product revenue was $10.8 million, up 26% year-over-year. We reported non-GAAP gross margin of 68.5% up 150 basis points year over year. We expanded our gross margin across all businesses. We reported an adjusted EBITDA gain of 4.6 million in the first quarter compared to an adjusted EBITDA loss of 1.9 million in the first quarter of 2024. Finally, we ended the quarter with $231 million in cash, cash equivalents, and marketable securities, and no debt. Moving to the details, our non-GAAP testing services gross margin was 76.7% in the first quarter compared to 76.1% in the same quarter a year ago. The improvement in testing services gross margin was primarily driven by ASP expansion. our patient and distal solutions non-GAAP gross margin for the quarter was 38.6%, as compared to 34.3% in the first quarter of 24. Excluding our transplant pharmacy, which has a lower gross margin profile, our patient and distal solutions non-GAAP gross margin for the first quarter was 67%, driven by a favorable mix of higher margin offerings. Our products non-gap gross margin for the first quarter was 54.3% as compared to 46.4% in the first quarter of 24. Improvement in gross margin was driven by better pricing and improved absorption of our manufacturing expenses associated with volume growth. Following the administration's April 2nd tariff announcement, we see no material impact on our business today. We operate mostly in the U.S. and have limited import of products in the U.S. that we manufacture in Europe. We anticipate less than a million annual impact toward lab products cost of goods. Moving down the P&L, non-GAAP operating expenses for the first quarter were $55.5 million compared with $52.3 million in the same quarter last year. The increase in operating expenses was driven by the investments in sales and marketing to accelerate growth in line with our commercial go-to-market strategy. We continue to stay disciplined in managing our GNA and legal spend, which is down year over year. I would also like to note that we have taken steps to reduce stock-based compensation expense, as outlined in our 2025 proxy statement filed recently. We expect these actions coupled with the expiration of agreements associated with former executives will result in approximately 35 to 40% reduction in stock-based compensation expense for the full year 2025 over 2024. We also have an update on the securities class action litigation. Last week, the company reached an agreement in principle to resolve the matter for 20.25 million. We anticipate that the company's D&O insurers will cover approximately $14.9 million of the total, leaving the company with out-of-pocket expense of approximately $5.4 million. We are now finalizing the definitive terms of the agreement, which will be subject to court approval. We look forward to putting this matter behind us. We reported an adjusted EBITDA gain of $4.6 million in the first quarter compared to an adjusted EBITDA loss of $1.9 million in the first quarter of 24. The improvement in adjusted EBITDA was driven by revenue growth and operational leverage, which contributed to better gross margins and improved non-GAAP operating expenses as a percent of revenue. Our adjusted EBITDA margin expanded almost 800 basis points year over year. Turning to our cash balance, we ended the quarter in a strong position with cash, cash equivalents, and marketable securities of 231 million and no debt, up 15 million as compared to 216 million at the end of Q1 2024. In the first quarter, we pay annual bonuses to our employees. Cash used in operating activities of 26.6 million in Q1 was driven by a reduction in accrued compensation of 24 million primarily associated with annual bonus payout. We expect to generate cash from operating activities during the rest of the year and on a full year basis. Turning to guidance, we are reiterating our revenue guidance of 365 to 375 million in 2025. As we discussed in our last call, the midpoint of our 25 guidance assumes approximately 17% growth from our adjusted 24 revenue of 316 million. Our adjusted 24 revenue excludes the 17 million in revenue associated with tests performed in prior periods. Let me do a recap of the details on our 25 guidance. For testing services, we anticipate our test volumes to grow mid-teens year over year. We estimate our ASP to be approximately 1,360 a test on a blended basis for the full year. On testing volumes, sequential growth by quarter, we continue to expect 5% to 6% in the second quarter, 2% to 3% in the third quarter, and 5% to 6% in the fourth quarter of 2025. Also, this does not assume any changes to Medicare coverage. Our patient and distal solutions and lab products revenue is expected to grow in the mid-teens year over year. We expect our non-GAAP gross margin to be approximately 70%, and operating expenses to be approximately $235 million for the full year 2025. We expect our adjusted EBITDA gain for the full year 2025 to be between $29 and $33 million. With that, I would now turn the call over to John to deliver closing remarks.

Thank you, Abhishek. In closing, I would like to thank all of the clinician partners that we have worked with leading up to this year's ISHL team meeting. At CareDx, we create life-changing solutions that allow transplant patients to thrive. But it is only in partnership with the clinicians that manage the care of transplant patients every day that we can achieve our vision of a world where every patient receives the transplant they need to live longer, fuller lives. And now I'd like to ask the operator to open the line up to questions.

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. We ask that you limit your questions to one initial with one follow-up so we can take as many questions as possible. Once again, that is star 1 to ask a question. We'll go first to Matt Sykes with Goldman Sachs.

Hey, guys. This is Will on for Matt. Thanks for taking our questions. Just starting higher level, you've talked about a gradual ramp in the return of surveillance volumes. Was it taking two or three quarters to turn protocols back on? Did you see signs of that volume starting to come back in the quarter? And I guess more broadly, where are we at in that process? Thank you.

Yeah, thanks for the question, Will. Absolutely, we are seeing signs of that volume coming back. We made progress on surveillance testing protocols. in the fourth quarter and in the first quarter. And we see surveillance testing in kidney volumes really leading our growth across all organs.

Got it. That's super helpful. Thank you. And then I guess digging into the maybe the expenses for the quarter, R&D and SG&A were a little higher than we expected this quarter, but it sounds like a lot of that was compensation and investment and the sales and marketing team How much of this is one time, and how should we be thinking about the rate of spend throughout the rest of the year?

Yeah, the operating expenses, we have been keeping a very tight watch there. When I look at the operating expenses, they were up like 6% year over year. When you compare it with our revenue growth of 18%, that is actually providing us about 600 to 700 basis points improvements of the operating expenses as a percent of revenue. Now, if you were to break it down between the three components, the R&D, S&M, and G&A, our G&A expenses actually year-over-year is down on a non-GAAP basis, and you will see that the increase is primarily driven by the S&F, which is basically in line with our strategy where we have been investing in S&M to accelerate our growth. R&D expenses, I see that they are pretty flattish at about $17 million on a non-GAAP basis.

That's helpful. Thanks so much, guys. We'll go next to Mason Carrico with Stevens. Hey, guys.

Thanks for the questions here. So maybe to start, any additional color you're willing to share around surveillance volumes and the progress you've made on protocols? It looks like you called out that you expect to have an impact in Q2. I know that's kind of on track. I think you guys may have been emphasizing back half more last quarter. So am I interpreting that right? Is the benefit getting pulled forward a little bit or just any additional color around that comment?

Hey, Mason, thanks so much for the question, for joining the call. Yeah, I don't think that we're suggesting pull forward. As you know, in last quarter's call, we signaled that we had anticipated some impact from weather and fires at the beginning of the quarter. And so we're just here emphasizing that we are making progress on surveillance testing, but given the slightly more muted Q1 volume, we're anticipating to see that growth in Q2. The centers have been responding very positively to the reinitiation of surveillance, and as I've been saying, we anticipate that as centers start on protocol again, they're gonna initiate newly transplanted patients on those protocols and that we'd see a gradual increase in the volume as they transplant patients month over month. And that has been playing out. That's what we're seeing in the field and in our numbers. And so I'm very pleased with the progress that we're making thus far.

and you know think we're right on right on pace with what we've guided for the year got it okay and john it'd be great to hear your latest thoughts around the max potentially issuing new lcds for transplant testing i mean how are you thinking about the potential timing there the impact i mean do you guys feel like you're in a much better position now if that were to play out given the amount of data that you guys have published over the last few years

Absolutely, Mason. I think that the data has really grown in terms of the body of evidence supporting the benefit of surveillance testing in kidney. We had seen the agency put out their press release in August that the MACs may be issuing a new LCD to update that literature review. and have that LCD become current with where the market is today, but we don't have any more indication as to the timing of that. We've continued to push forward with the KOR study, for example, and submitted that manuscript back in the fourth quarter, and we're looking forward to seeing that in print, and that should certainly contribute to solidifying the position that surveillance testing should be covered for these kidney transplant patients.

Got it. Okay. Thank you.

We'll move next to Tycho Peterson with Jefferies.

Hey, thanks.

This is Matt. I'm from Tycho. Maybe first one, congrats on the Epic launch. You know, I think you had previously kind of talked about maybe launching that mid-year. So is that a bit sooner than you had initially thought? And then Are there any kind of one-time step-up in costs associated with the rollout of Epic? And then just, John, on the other side of that rollout, which sounds like it could be by the end of the year, can you just talk about kind of the friction removed for those centers and what you could theoretically expect to see from a volume impact on the other side once fully rolled out? Thank you.

Yeah, thanks for joining, Matt. I'm going to ask Keith to take that one.

Great. We're really excited about Epic. We have 20 people up there right now for their user conference, which is going really well. I think we're one of the largest attendees. I got some pictures that they had our name up there on the big screen, so that was really exciting. We've been talking about this with customers here at the conference, so they're very excited about that. We took over the Epic environment in early April. We will have that fully launched, and essentially the setup that we will deploy with customers is by the end of the second quarter, and then we will, starting July 1st, work on the first pilot launches. So you select a group of customers that will work with you to launch this, work out the kinks, and then you go out and you broadly launch that, which we will do starting in the fourth quarter. And people are very, very excited about that. We have a couple tricks up our sleeves we're not going to disclose right now, but we're working on a couple other things to really make this impactful so that we're building our way into 26 and 27 with clients. I think generally the response is really good. I think Epic told us we're a couple months ahead of anybody else who's ever done this, so we're really working hard at it. Just so you know, this is about a $5 million investment every year for any diagnostics company, and then they have you know, a per click, per test fee that gets added in there. But in the end, I think Epic would make the argument, everybody else would make the argument that over time this pays for itself.

Okay, great. Thanks. And then, John, I appreciate the color just in terms of the two new product launches and the opportunity in terms of existing volumes for each one of those. Can you just kind of help us better understand, you know, a realistic penetration for both of those and call it year one in 2025? I mean, is it a few percentage points to what you talked about, or could it be something more meaningful kind of in the double digits? Just how do we think about the launches into the two kind of indications you described and what realistic penetration could be in the, call it, near term in 2025? Thank you.

Yeah, thanks so much for the question and for joining. I think realistically penetration could be relatively high in those two indications. As I shared, the total volume of procedures is not huge, but they are significant procedures and ones where the clinical scenario is just slightly different from the core adult solid organ transplant validation of the testing. And so we felt like it was really important given the increasing volume in simultaneous pancreas, kidney, and the really, really significant medical need in adolescent heart transplant to get the products validated for those indications so that we can deliver to those clinicians a validated report and give them confidence in using the testing for those populations.

We'll move next to Mark Massaro with BTIG.

This is Vivian. I'm for Mark. Thanks for taking the questions. I think in the past you've discussed improvements in billing and collections as a key lever in driving ASPs. I know you touched on Epic integration earlier. Is there just anything else around maybe Salesforce incentivization or just any other variables to call out that could further drive ASPs here? Thanks.

Yeah, thanks, Vivian. I'll let Keith talk to that.

Hey, Vivian, it's Keith. As you know, we just made a large investment in the leadership team and the revenue cycle management team, as well as the rest of the staff. We just came off a really productive off-site. We're re-engineering all the workflows associated with revenue cycle management, and so that's been very productive, and I expect long-term benefits of that. So we made the decision to focus in on the near-term getting the claims, filed clean claims, doing eligibility verification on 100% of our patients, improving our authorization success rate, and establishing an appeals team and process to dramatically drive ASP. I think these improvements will take effect over six to eight quarters, so you're not going to just turn on a workflow and you know, 10 days later, there's a major impact. But I think what we're trying to do is drive significant increase. And the way to do that is to get those claims in on time and clean claims. And then I would turn to the market access side. And on that, I'd say we're focusing on the coverage and contracting with key payers, including the VA as well as the Medicaid states. Driving second would be driving payer adoption. using our Allishore PLA code that John referenced. The third would be systematically reducing the number of required prior authorizations. So as you know, on Medicare Advantage, they can require prior authorizations. It's really important that you manage that process. And then the fourth is what Robert talked about, is using newly published clinical data to drive medical policy reviews and guideline updates. That'd be my summary of how to address that, Vivian.

Yeah, that was great color. Thanks so much. And then I just had two quick cleanups on the model. Just the first one was other labs in our space have called out severe weather impacts. I don't think I heard anything on that front. And then just the second part was prior period collections of the quarter, if you could touch on those two.

So on the first one, where we talk about the impact of the weather on our testing services volumes for the Q1, We believe that it impacted about 500 to 600 tests for the quarter or about a point of the growth there. And on the second question regarding the collection adjustments, we have called out $1.1 million that we basically take as a write-off due to the age receivable. And that's what I've called out in the adjusted revenue for the testing services. where the revenue for testing services was $63 million on an adjusted basis.

And I'd point out that that is over probably three to four quarters of revenue. So you're talking over a $1.1 million adjustment on over $300 million in revenue. Yeah. So it's essentially a minor cleanup of the ARs, the way I would describe that.

Okay, great. Thanks so much for taking the questions, guys.

Thank you. Thank you. We'll go next to Brandon Couillard with Wells Fargo.

Hey, thanks. Good afternoon. John, the UNOS procedure data is pretty muted year-to-date, kind of only upload singles. What's embedded in the guidance as far as kind of overall procedure volumes, and does that need to pick up for you to hit the high end of the range?

Hey, thanks, Brandon. Appreciate the question. We feel like we're on track with our guidance. Our business, as I said in the prepared remarks, performed really strong in February and March, and that continued into April despite the softer start to the year on transplant procedures, as you pointed out in the UNOS data. We also believe that there's the potential to see a significant uptick in procedures in the second half of the year as the IOTA program initiates July 1, 2025. So we provided in our long-range guide an expectation of 5% overall growth of the market on a compounded annual basis, which is consistent with historic trends. And that number tends to go up and down every year by a couple hundred basis points. And so we feel like we're still in a great position on the guide. and we're not really concerned about the transplant volumes right now.

Okay. Then on the new CPP code, John or AJ, can you just walk through the impact of that and how it leads to greater in-network coverage and, I guess, ultimately a higher ASP per test?

Yeah, that's a great question. You know, typically just because you have a code doesn't mean you get paid more, but in our case, because we have – substantial evidence supporting Allishore and we have been gaining private payer coverage over the past several years, what we've seen is that the absence of having a test specific code has inhibited our ability to get payer contracts and get in network for that service. And so we decided to pursue the Allisher-specific code, which we can use for heart, kidney, and lung, because it's agnostic to organ, to contract with third-party payers, like the Blue Cross plan that I described in the prepared remarks, and get in the network, which allows us to get paid on a first-pass claim and get paid that contracted rate versus the claim being denied because we're billing an unlisted code and then go through the whole appeal process and it take, you know, many, many, many months to collect the cash. So we're really optimistic about the impact the code can have, given that we think we can convert some of these coverage policies into contracts here in the near term.

Thank you. We'll move to Thomas DeBorsy with Nephron Research.

Thanks, guys. Just first question was on transplant pharmacy. You mentioned seeing an incremental benefit from transplant, the transplant pharmacy on testing services revenue. Just where to get the word color in terms of, you know, how you're seeing that play out in practice with patients?

Thanks, Thomas. It's great to hear from you. Thanks for joining the call. I think the way to think about that is, as we laid out in our investor day last October, we believe that the synergy between our patient and digital solutions and our testing services business is very strong. And as we sell solutions into the transplant centers, such as our software products, our pharmacy offering, it gives us the opportunity to unlock more growth in our testing services business, whether that be capturing more patients that are transplanted on the center onto a testing protocol or ensuring those patients for which testing services is ordered on the protocol that they adhere to that protocol. And so we're seeing that our patient and digital solutions, it's not that it's giving a revenue benefit. It's really giving us greater access and deeper engagement with the customers to help convert into more, for example, Allishore kidney protocol adoption across these centers.

Understood. And just as a follow-up question, On the IOTA program, you had mentioned last quarter software to automatically, I guess, track quality scores for transplant centers. And I was just curious the feedback that you're getting from centers of that solution.

Yeah, we're getting a lot of positive feedback on that. Thanks for the question. We've been on a bit of a road show talking with the centers that have been selected for the IOTA program because that's a public list. And our team that manages our quality reporting software tool has been going center to center, having discussions with them about preparation for the initiation of the program and the enhancements that we're making to the software that that enable them to report. The reporting process for IOTA is on an annual basis, so they don't have to start reporting on July 1, 2025. In fact, they won't have to report until June 26. So really, for us right now, it's education on the capability set that that software tool is going to have so that it enables them to track their progress throughout that first year cycle and then be prepared to report when that first year cycle ends.

Great. Thank you.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad now. We will go next to Yi Chen with HC Wainwright.

Hi, this is Eduardo on for you. Just a quick question about competitive development in the space, specifically OncaSight and Vitagraph and their recent announcement for Medicare expansion. Do you envision that having impact, any impact on your guys' guidance, or do you guys consider your technology to be kind of far better and superior?

Hi, Eduardo. Thanks for joining the call. I think I read the OncoSite announcement this morning stating that they were going to initiate a study to try to get approval for their product, but that it's several years away. So I don't anticipate that having any impact on our guidance. And quite frankly, as you know, we're the market leader in this segment in transplant, and we've been in this market for nearly 25 years, so more than half of the life of the ISHLT program, CareDx has been participating in this conference and with this community. And while I think competition is always good for patients and for clinicians in the market and for innovation, I I don't see one entity like OncoSight really having an impact on how we guide the year.

Okay, yeah. I mean, I was familiar with the graph to share, which is the digital PCR. That one's still in development. The Phytograph, as I understand, had regulatory approval, and they were looking to get Medicare expansion.

Yeah, it's not something I'm familiar with, Eduardo, but we'll look into it. All right. Thank you.

With no further questions at this time, that will conclude today's CARE DX first quarter 2025 earnings conference call. We would like to thank you all for your participation. You may disconnect at any time.