CDNA - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to the CareDx Fourth Quarter 2017 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, David Clair. Thank you.

You may begin.

David Clair

you us thank and afternoon, for today. joining Good results quarter ended today, CareDx XX, the financial released Earlier December for XXXX. The the release Company’s on website at is www.caredx.com. currently available and Officer, Peter Bell, call. and Executive Maag, President; Chief Chief host will Financial this afternoon’s Officer Michael

of and I the get to like securities made which meaning be that of started, management including, examination risks undue these future materially that include or limitation, pursuant remind this those our material our statements, are anticipated statements Private federal to upon trends, and of involve financial during you statements of statements XXXX. not expectations cause the Before deemed Act call Harbor forward-looking Accordingly, are statements. uncertainties Litigation differ that expectations estimates forward-looking to Safe will would statements. without actual These we that everyone historical making from on statements forward-looking these statements be matters statements. Any within should laws the by results decisions, in not assumptions. Securities call of enrollment implied should and this to contained various be could based and operating Reform All forward-looking provisions reliance are pricing facts place current historical regarding coverage

I conference risks of information required This or as revise statements, whether list Exchange except forward-looking Commission. and to future Securities uncertainties new call a any please of and associated contains or is financial information, events filings law, the obligation, any and the with see or update and filed CareDx For descriptions with include call because sensitive of release, our otherwise. projections our business, by intention Accepted or comparable Accounting disclaims in today, the measure This XXXX. GAAP directly a that earnings call calculated be SEC. financial financial Principles. in now only broadcast measure Generally over live turn to will of will March the to with today’s Reconciliation most with the not is Peter. accurate the may discussion accordance XX, a as found also

Peter Maag

Thanks, us. achievements very David, business recent AlloSure, be fourth I I Thank the our update afternoon, AlloMap recent the very three you a afternoon, quarter. had will core will for This provide joining good drivers. on exciting steps across everyone. we providing and commentary and much the also pre-transplant. XXXX Gleason, the an We details then TRIO, our the President Organization. provide our on will full-year sheet. Transplant fourth and taken have a me let quarter to simplify call additional of Jim But, from Mike financial our performance start Recipients and International quote with balance discuss guidance. on

great As CareDx Peter is thought of he and and innovation said, see field the It their at transplant dedication care. CareDx to he filed more years in as the is is observed leader transplant Innovation have noteworthy”. XXXX more and “We for and team in Award, the his innovation that recognized presented to the

have revolutionizing cancer the to as to technology And of the made sequencing-based transplant available their and to goal advantage, solutions bring milestone. believe decision. hard the me I make make like to We technology national is they on Foundation CareDx it working this the I here been on Let a congratulate would at new our Alongside to patients. CMS Medicine’s comment we clinic. first Foundation have FoundationOne field FDA a diagnostics. combined coverage mover team surrounding others, have also sequencing-based

levers key as as understanding technology that mark them. our we for for the addition utilization great The patient a combination grounded deeply us supports community latest and needs, as information, creation value well the of patient transplant affinity are In the to genomic centricity Company. in of

Now AlloSure. to

CEoT several attended free Implementation cell transplant the Surveillance: where meeting, kidney hosted recently Cell-Free in we Health for of in entitled Allograft Transplantation CareDx Clinical recipients. or Innovation surveillance donor-derived rejection symposium a of in DNA in solution new future represents presentations Cutting positive Transplant Our Edge We well-attended included symposium was opinion adoption. key believe from DNA leaders attendees AlloSure CEoT for This the a Testing strong. transplantation indicator kidney Patients. this for by fields. and Interest heart

We be are for banner total currently of preparing XXXX June, American Congress XX%. growth a key our for revenues meeting of We in year-over-year in highlights million, was Seattle the achieved $XX.X a which year. Transplant of will year one this CareDx.

launched in We also Medicare reimbursement for secured quarter. the and AlloSure fourth

CareDx unmet reimbursement have management Medicare significant kidney estimated an XX% Medicare AlloSure better transplanted transformational of newly reimbursement decision, AlloSure transplant and for of favorable this need, patients a enabling Following addresses a opportunity coverage. represents patients.

into Just a transplant AlloSure already patients’ a lives. impact launch, the kidney is positive making months few on

the launch, quarter and results AlloSure $X.X the centers test XXX provided transplant During the patients, revenue. CareDx kidney XX test representing in to offering began of initial million AlloSure

as carried of We has testing February momentum XXth. centers are XX that very transplant excited into initial over providing AlloSure AlloSure this XXXX patients U.S. to with

opportunity a transplant protocol recommended across the recurring as and the recommended study second XXXX have is testing surveillance deliver the of the in profitability the workflow kidney centers prospective update the our that received AlloSure and projection with initial allograft easier patients. second for The year protocol patients patients their year. use and needs through line followed testing positions quarterly beyond. transplant tests CareDx use year half and meet CareDx. first have on The The testing AlloSure years. in during the recently transplant testing as launch to AlloSure the seven and based orders AlloSure kidney standardized both recommended trajectory as protocol our enables the Importantly, to includes previous that includes kidney DART of standing by received a revenue as established accelerated in testing well schedule routine We providing during in of growth developed

that We January had define We December the adherence standing of XXX patients end standing at routine of patients an as for AlloSure. patients order seen the surveillance the patients. follow focused in of that for that by will order least and the on transplant the AlloSure patients centers receive mentioned are was protocol utilizing recommended XXX one-year. protocol schedule driving kidney multiple have testing to number testing their We

As progress efforts, key order make in to a metric number we launch follow. the patients of be will standing our

addition renal to part efforts, transplant registry commercial In enrolling coverage in begin patients our as data our our Medicare of we with development.

outcome As endpoint a is primary our the Registry a transplantation AlloSure effort, on patients study X at post of X,XXX total Outcome biopsies a with observing and KOAR X, reminder, centers kidney renal across number and transplant enrolling X performed. a XX years, centered patient three-year

X,XXX opportunities over wealth representing patient enrolled we testing study. the AlloSure the enrolled data, a in going another providing clinical more and five volume the with years, estimate have be KOAR was driver next of to end addition Consistent this In of our innovative than patients continued first well incremental plans, forward. at January as KOAR as to represents AlloSure revenue

nine end as As XXXX, centers been February our study in of have was registry of sites, which the with initiated plan. line

studies. well direct additional centers It The recognize for a Center University, Saint lot centers Center, a Brigham provides institutions keeps executing Tampa Barnabas initial with KOAR as States capability on the with with the University strategic Kansas medical an is Medical touch in-house see We innovation Company. our Medical multi-center key a the key and us country like all of us the & of very United Baylor South including in KOAR Washington large Carolina, Medical as University Colorado. John of and clinical capability across and in Scott team Hopkins, point White, the of We University studies will Hospital, of General running hubs. the transplant of Hospital, Women’s dialogue

shifting to quarter also Now, to test XXXX Fourth results. translating volume million. XX% $X.X patient associated revenue into increased X% AlloMap. year-over-year, X,XXX With increasing

key of XX patients But adherence the a AlloSure, have our growth to remain of will centers transplant to AlloMap increase we Our focus team would forward. from strategy understandingly where component usage. we little identified having a efforts benefit additional AlloMap the believe shifted going

York, We Chicago. will and our are us and data four also to of progress areas allow like New our by major number LA field in reduce in which increase individuals, coverage territories metropolitan realize to team

the CMS XXXX. on directly allows done at CareDx test. Additionally, tests clinic was drawn work the AlloMap visit. center in for AlloSure hospital, the or patient’s change Medicare recall in known of recently their XX policy, which Day normal of or a Previously, that Rule, Date blood would change its AlloMap This as day blood the in drawn hospital at the home to an get order addition bill patient AlloSure and patients became now X, January to implemented service that to to receive Service their a effective at

AlloMap. this it we are will take a dealing workflow medical large while new institutions, for with to implement As

and reimbursement AlloMap to increased XX% testing will effective X, AlloSure this to positive on believe impact improve a we access Also, will rate patient However, transplant patient X,XXX. both on the have to XXXX, likely ultimately center AlloMap Medicare protocols. January by adherence and

reminder, represented increase representing a royalty our Roche least has revenue. increase Medicare fourth gross this of an with As our important contributor margins to reimbursement reimbursement AlloMap of profitability. combined the XX% anticipate XXXX approximately at quarter to We expiration future historically the to AlloMap XX%,

to lines used $X.X XX% X,XXX product estimate the with that labs estimated with products. in quarter continued typing Olerup than worldwide. products in our increased best-in-class, the more HLA business are the million, pre-transplantation Our our reflecting X% Olerup We of traction transplant

progress make to generation HLA on next QTYPE. continue product Olerup typing We our

both also represents as accelerate we Roche of launch a with improvement marking this significant year. differentiated year, and should transplant in HLA we and the have. the actually the announce first a use Lifecycle for QTYPE compared ABI of on management. these customer QTYPE to on driver pre-transplant centers methods, end which platforms faster regular growth CareDx QTYPE both is By revenues instruments. as the for further compared February, journey And anticipate demonstrations in validated Olerup to great the of using offers profitability. QTYPE Olerup offering a am facilitate CareDx since today, we XX solutions our to the along the CE to Olerup half information typing that reminder relationships a post-transplant the pleased company turnaround platform a to performed provides of an that patient in methods. important current to is the establish and patient XX As as QTYPE to basis and path on I centers legacy well time worldwide are Company’s testimony last focused have demand

financials. the we have done year have a Now, on have key comments like to terrific I some filers, sights we would ago. our progress This timely Mike sitting our across year and another priority, a the simplified make job year, balance has sheet on team the upgrading since a here, profitability. to clear are Bell, What difference a made table makes. joining

fully material consistently finance into our all pleased announced binding to and were XX-K, to but upgrading the our have Mike? We now only timely weaknesses enable and a us balance to the sheet. of Mike financials. call which to Mike also our to necessary signing and remediated in documents our team, fashion. like I over closing Perceptive the to We improving Advisors, in date a of his the have with outstanding consolidate in XX, XXXX SEC turn strides have the stay would discuss that place that debt us letter also that to recently term file made great put our I’m in we reported processes allow team on single loan the April XXXX. in not simplifying will a of commitment

Michael Bell

Thank you, aboard progress since a Peter. incredibly I have ago. year the that came the excited to has I Company made say I’m by

the In reporting the balance path out strengthen to controls finance sheet, launch to our to key on accounting and addition continues set the and to significant our a to make improve team to financial and of objectives, simplify AlloSure, profitability. which were progress and

now forward tremendous reach. be a focused these look help CareDx into and company As in all we’ve build made I’ll global with fonts, great transplantation to progress able

the the a balance term funding balance immediately Advisors, majority $XX our Peter well recently owed $XX of mentioned, convertible JGB new we binding and term to of commitment Perceptive debt, Allenex between will which approximate our As Bank the date former with we’ll provide April loan Danske million million. with the shareholders. a XXth, remaining and as sheet $XX million loan payoff as the use the to simplified letter At signing of

conversion As principal, debt a March to balance includes option $X.XX approximately $XX.X at per JGB the elected convert fully reminder, a outstanding represent common JGB X.X If debt into of X, to the for this million shares. JGB would CareDx of million our convert shares price the share.

intention our give March to period For required is we a of the JGB XX-trading-day on Xst. notice prepay the CareDx did to debt which them agreement, the debt,

given X.X shares. we’ll $XX.X the at conversion which new April formal notices is draw of As Advisors next notice of the The to the which very term option XX-day the initially of million outstanding for loan. us from million XXth, level equates $XX on what allows an the over months. needs. has our on principal, of it the to million this flexibility draw period XX based $XX We’ll us JGB our Perceptive as time, or end time additional draw us, Having was $XX debt to of tranche also within have ultimately million to and optimize we important common

Company weakness team the finance remediating made strengthened Our during that the material also significant strides identified XXXX.

was went it through all great those see remediate steep weaknesses As XXXX the able challenge. the filing. curve, Company rise Obviously, team XX-K to learning the for Peter we but the to a mentioned, of were to

P&L. Now, turning to the

As million. was mentioned, fourth quarter $X.X AlloSure revenue

with initial and trajectory of line Fourth test initial We’re following million. revenue to XXXX, $X.X XX% the launch momentum the quarter revenue with the pleased increased year-on-year with very expectations. the our in AlloSure AlloMap

Our the million, in increase was a year’s quarter revenue compared X% fourth XXXX the as representing million. year-over-year such to prior $X.X XX% to increased pre-transplant $XX.X million. total revenue And $XX.X of

addition, million In CareDx represents of a which growth for revenue full the XXXX, XX%. achieved of year-over-year $XX.X year

operations in and our loss at XX, cash non-GAAP XXXX. loss of used fourth December non-GAAP million, same of XXXX, our quarter was $X.X compared which and million and consisted million, the period $XX.X million cash. line the million net total quarter expectations in which XXXX in $XX.X was with fourth to Cash cash our the restricted cash was million, $X.X was For $X.X in net a equivalents of in $X.X in

Now, agreement. related cash restricted the $X.X JGB to million our of was the

when in we available use our debt April. that So will for become refinance

to guidance. Turning

$XX the of million in initial $XX is Our XXXX revenue range expectation to million.

our as Olerup QTYPE, We’re half second driving expectations continue that, positive AlloMap for Peter. our focused the profitability Medicare of AlloSure towards the ramping to anticipate on during increase for Company pass from the reaching price XXXX. I’ll contribution And progresses, of growth revenues profitability. back given and XXXX we EBITDA With pre-transplant to

Peter Maag

Mike. accomplishment to forward CareDx’s year proud I’m in you, strengthened to huge and Thank sheet, XXXX, With the of I’m and focus very our XXXX. of positioned balance the opportunity Company. is on executing front simplified in team’s in on record solely looking the another

for finally on questions, AlloSure May, conference during simplifying early I congress progress In in AlloSure Xth, concept launch. conference congress sheet. and of AlloSure will ISHLT the customer EFI the I the on meeting balance AST wanted in June heart half I highlight and first anticipate Then, the day. to will up with on we further Perceptive. remainder Olerup to open and accelerate we making key will of introducing full Before the call interest same questions. And April QX call subsequent our our the elements combining transplant an step XXth, France, for symposium an we XXXX. in QTYPE events the the with the will for hold XXth symposium AlloMap that, May key at the schedule the financials we we April On we’re on report and will at refinancing With during patients. press Seattle, That’s the our open a Italy. XXth, the next AlloMap hold On in our for have close we

Operator

ahead. from Thank Craig-Hallum. first is instructions] Our Kevin go you. question Ellich [Operator from Please

Kevin Ellich

to the how you Good $XX any the you to questions. much million could million, contribute starting afternoon $XX give I as guidance, thanks AlloSure us of taking the color Peter guidance? to expect with to guess, and for off

Peter Maag

expected. Well, so That’s thank a much, think, guidance the be total I revenues good are question. Kevin. on you all this And we giving to

not single We’re wise in in be product level. the our is say But, on what that have can mid and growing bump on AlloMap a growing get down little we the digit we’ll breaking to pricing. it then and set bit type mid-single we is historically business pre-transplant volume digit individual

of remainder into that come the take you consideration, AlloSure if franchise. would So, out the

Kevin Ellich

makes patients study. thanks a How sense. the you have on then, detail many how have many And of KOAR That actually been for centers lot enrolled? in

Peter Maag

first number specific you thought on are be target a concluded next call the the us a numbers. as these be We’ll process this of is running, the and given business being once centers year. early that enrollment centers on enrollment the as But quarter ourselves really We updating for ramp, and to because of call, going we June on to indicative for company the a enrollment for is think execute. start. in steep to at And overall up have very ability

patients tracking last being the So, are enrolled think And of patient the still in XXXX. we that target. I towards roughly X,XXX June

Kevin Ellich

then, over Mike. switching And to

you the has made formal provided gave notices. Did it was common comment shares? think I X.X or you the million million -- XX.X you about JGB

Michael Bell

shares. $XX.X had million which principal is converted, been X.X million the said of I

Kevin Ellich

And as or March that of was today X?

Michael Bell

today. of As

Kevin Ellich

give Okay, way you debt the could balances, give you could great. well? Any way December and -- today balance of as cash as XX we us any the us have current

Michael Bell

sort QX report I be will Well, QX loan. able course, where moving are is of we’ll the on report report a when completed April of the balance to when we’ve think we the target. we numbers. number And and the term debt current And cash new we on XXth the Perceptive debt our

Operator

is Please next go C. ahead. Yi from Wainwright. Our H. question Chen

Unidentified Analyst

for Hello. taking questions. Yi for Mitchell This on is you our Chen. Thank

million? at is the are revenue XXXX, about XX guidance number the for confident you how question given first XX% XX our growth So, -- meeting of

Peter Maag

cylinders all on at the firing are we think, I Well, Company.

the price increase a see been You positive base that on has can business. AlloMap

pre-transplantation in is, a few Olerup that transformational use And then, providing really months AlloSure the us opportunity. the I first mentioned, launch. XX like is to You test lot of type the centers starting can the franchise. the in see tailwind into

So, unmet indicative medical number need. I think of the and a great

quite is early we alongside what So, that we feel guidance in this it thought company. we’ve good big and to a good for And is about it’s items. been a the year. the But, targeting as provide

good So, it’s a number.

Unidentified Analyst

to And that past revenue growth any potentially do plans have guidance? you then, accelerate

Peter Maag

of all growing. have firing away drivers we of and obviously, Well, them growth all our

as right now, we’re can in And you updating So, do. be best and we guidance quarterly I is think you the progressing will we updating guidance. versus calls the our

Unidentified Analyst

And could later than XXXX surpassing AlloMap then, be that? AlloSure or it revenue do by potentially foresee about you

Peter Maag

think, early very we’re launch. I in the

I But few launch. is into a As mentioned, gate. launch Remember of opportunity market reimbursed are that than a out the we is times months XX cart. within well that given AlloSure think AlloMap, XX% I AlloSure has bigger the the right this

of Company Xth So, time taken to we to the elements it key a reimbursement success test And high-value the AlloSure XX% the see rate out right get molecular the for has reimbursement launch with one level. this that very date. of of the is diagnostic really the long October

dynamics So, positively yes, AlloSure the launch. towards that there a lot play of is

Operator

Quirk Piper ahead. Our next Jaffray. Bill question from go Please is from

Bill Quirk

Hi.

curious becoming you’re you’re we KOAR and trial your point the -- question your about more enrollment can schedule. guess, about it guidance move seems just where -- it’s it about what not on to it’s first any conference how expansion thinking ahead I there. so is Just schedule, the that aspirational certainly longer So, in you the given aspirational much thinking call. me running is XXXX is And that center of to talked right concrete? on last Is

Peter Maag

question Company nothing I’m think, we’re obviously not rehearsing and because in changed that plans XXXX. terms have this AlloSure for guidance Somehow, tracking But, our centers. you If the question I of seeing we in our been trajectory. anything, giving well in and we’re this has many Bill, asking are surprised

where As centers little that we our centers, superseded in wanted at a to year the then, thought you goal. is be know already launch And against XX we which in originally quarter, in bit last we’re that projections. we and ahead first XX

me we want be discussed So, we we’re plan. XXXX little bit driven ramp that the flywheel the a largely It standing focus think self. set our give will does where that execute our by that do opportunity to well the AlloSure and number on on well guidance the I concept comment patients. to order against we that on earlier

and the the about standing orders, really standing think the so, significantly in. first testing have in repeat fourth adding being swings superseded we quarter quarter And where to orders

very dynamic see XXXX quarter we’ll fourth sales, indicative in So, will total the growth rates of quarter because fourth trajectory the be and really.

Bill Quirk

just but order. It ratio actually half this, it flywheel kind we about Fair are to looks and fair, the Does quarter have like, of point roughly looks there. be all here like the to one standing assess that thinking And of AlloSure patients on I’m patients, on go-forward kind that of as order to at the quarter first increase a will just standing we get XX-XX but well? the as stay continue a not to or expect into percentage volume, basis. roughly range trying the should patients there. sense of

Peter Maag

Yes. I that’s good thing think to And monitor. a

patients. the because I the order will patients grow pool standing order rapidly the feed the registry think, standing KOAR of will

a are that are but And about are these tested in not have of coming AlloSure. patients. the towards order standing patients, in order in are past positively twice. that three are that we skew said So, four necessarily these patients the once two, the -- and the that really are KOAR were patients surprised -- I’m year way, and towards number into the I patients standing

interesting So, think as dynamic. this of an

And think that a anticipate the flywheel what’s patients standing growth order very and standing is growing. of these because is will is to total important continue I be so we speak is of overall patients that the increasing. to steady set number order mean

Operator

James. ahead. Our from next question go from Nicholas is Jansen Raymond Please

Nicholas Jansen

Just just a are than maybe some alive, little then group so improve -- are But of the sure are seen I’m to rates. that the improve kind the how of and And sure get no deeper has certainly dive there reorder they more XX -- that experience maybe -- the group Hey, utilizers from and adopters heavier wanted early have guys. the bit trying I and afternoon. sense just November Good improve? to others. that into about far. the talk of centers have of December October October you adopters segmentation been have a the group been the

Peter Maag

is question. very the rehearsed having Think AlloMap great well always of protocol Nick, this us with adherence. as launch

adhering standing placed So, do schedule the is order, sure have I focused on patient once how is And this the is next we our to opportunity sure in that critical. right absolutely testing making AlloSure this and place patient team at is that on when make the and can protocol myopically he gets the time.

I that patients. XXX these standing I XXX order mentioned So, our within are capability patients, managing adherence really well patients. we this say -- would of is driving And on

now. percentage In right terms of high it’s of adherence, the very

the in good we’re these to we versus adherence So, be the XX% and in treated the tightly. still going that adherence seems are aiming well this will two adherence no, very adherence feel keep are the year of tougher. a XXX%, but a will for in we study, is three within mostly easier be very on It driving never reach. AlloSure But it. very, bit patients north since be in hospitals protocol that little significantly about and KOAR mind But, first

Nicholas Jansen

people. would be going the second you you force, question And to you’re just four be adding sales think then, I as on, my believe about said

ahead it’s organization opportunity Just size the realignment the curious, more necessary to your even how of being bodies bodies the about, of and on if of given are you? to do where be think those add added? thoughts kind we And

Peter Maag

the that with all What true, from and months we areas, the in airports justify well centers. Probably from pays individual wasn’t weather have first even attention. flying close in for these having transplant weeks we learned it in centers these transplant easy. the really with the personal three And interaction that also that metropolitan few learned last large major

gives to but territories thing it four cutting And good we expanding not dramatically think seem across our for the do size. to adding is that at So, right territories us into to XX us field this stage. force that existing be the the U.S.

us So, don’t adding quarter in think additional of every as now territories.

we feel the be think, able very cover I to comfortable to universe.

Nicholas Jansen

question last in thinking if And conversion, for that exiting we as count of including out should then, my expect call you the the let’s maybe plays of share what’s debt -- be it everything terms terms diluted just options XQ? fully Mike, in about, you,

Michael Bell

Well, to can notice convert top and giving And the options Xst, there then another had X on -- prior warrants million Nick, of March JGB there that we is million. outstanding. They X XX with the is conversion on million.

So, it’s million shares. XX around

Operator

This concludes closing back to over the Maag for the I’d question-and-answer turn session. like floor to comments. any Mr.

Peter Maag

Well, thank look continue we AlloSure, our very as for updating you call. very AlloMap profitability. to joining everyone forward business, much. the commercialize towards grow We you Thank progress much and to pre-transplant and

Operator

This concludes today’s teleconference. Thank you for participation. your

this your disconnect may You time. lines at

CareDx (CDNA) 22 Mar 182017 Q4 Earnings call transcript