CDNA - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the CareDx First Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to turn the conference over to your host, David Clair. Thank you.

You may begin.

David Clair IR

you us thank and afternoon, for today. joining Good results quarter ended today, CareDx XX, the financial released Earlier March 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

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

Thanks, required risks list live CareDx is Commission. disclaims XXXX. a a will accurate business, only the a with Reconciliation of law, filings GAAP good For call projections financial and include found with the financial information, today's update earnings Accounting most broadcast measure with filed not to Accepted Securities descriptions forward-looking over release in the obligation, now or the to statements, to is any and first sensitive Foundation's we and or contains Exchange afternoon, will discussion measure because our Principles. information at future initiatives. significant transplantation in turn otherwise. calculated events financial any of as joining XX, also Kevin welcomed be Peter you and CareDx. Kidney National and We Longino, may us. our accordance that importantly, our traction This call with May the Most David, focused except today, to Maag SEC. an associated on uncertainties conference exciting by new Thank of headquarters Generally of or I the directly gained call whether CEO, please or as the comparable This see Peter. for revise We our everyone. had recently intention quarter.

Kevin will the provide our pre-transplant. will are call. drivers: validation a the the our tremendous also top additional and recent choice the update, to of I achievement $XX.X business of year-over-year this see year. line to and of recent transplant respect on his testing in have would increase driven acceleration XX% by to beginning revenue AlloMap see an the respect out build guidance. them year-over-year partner XX% to It It's with of our the highlight million. care three performance great technology across Illumina, like provide the my on stream growing the XXXX in another with total will CareDx AlloSure, since $XX.X in first million, in update our revenues Kidney at details commentary CareDx news with on inflammation a start quarter a what into Mike to and discuss of tremendous After positive our [ph]. provide marks to for financial our of which National team Foundation external This from industry afternoon, strategy this leader we give for We doing, agreement key also at and shout to I as

firstly Now AlloSure.

AlloSure big transplant has launch, We the impact centers time well many community. are transplant at wider delighted that made as across in a since short as a

and by to At approach provided their the internal than launch, is which initial embraced transplantation surveillance to patient since quarter, end first X,XXX transplant results transplantations. centers. being of have transplant in is better to XX kidney centers more AlloSure the quarter Our projections. provided XXX our kidney patients the CareDx results first

patients standing to We years. to received as seen in the order received the XXX who surveillance AlloSure AlloSure, which order we that use quarter focused protocol represents We recommended see standing continue to least multiple patients kidney routine the added protocol. standing establish the one-year. for testing patients effect the important the to this protocol the allograft dynamic, as patients have Registry as remain demand also recurring follow of for were is of that at important Kidney first patients to centers patients gross trial, utilizing patients hearts as it basis both clinical our defined quarter. rollout We driving XXX K-OAR. from to previous kidney our transplant is previous as Outcome on patients a their revenue standing recently order AlloSure testing schedule will our An In order the XXXX, from the Tracking and with adherence well flywheel of or element known describe protocol. adhering our new

X,XXX three development of patient post observing will is the with for a outcomes at two Medicare K-OAR years. As centered and study XX across patients out years K-OAR longitudinally coverage commitment. on our transplant transplantation. data one, enroll patients primary three The with centers endpoint follows reminder,

opportunities next providing clinical data, to volume. representing AlloSure years, the wealth of AlloSure addition incremental a K-OAR more generate estimate we five will testing XX,XXX In than over

study keep the of hub transplant in opinion and studies the capability expectations. as on March, Studies been innovation internal with like with us and execute as leaders. an multicenter which sites have dialogue patients continues point been advantage have see strategic team enrolled, studies. the centers our all K-OAR company. with We with centers in-house provide to a in is our initiated K-OAR line XX XXXX, and touch XX for running The of end of direct of well us additional large key As

a K-OAR of our for provide of also as transplant of class a great as in innovative care, collaborations We exchange. platform participating these theme with also potential partner It validation view world research clinical being well fits scientific the technology. in the institutions this

of example, clinical For goal important we XX trials or more set for ourselves the provide year-end. clinical trials generation the supports to initiated the opportunity investigator These and support of by field transplantation. data learning

entitled sharing currently in Surveillance, Allograft for implementation preparing a Health in at in testing are Congress will will showcase clinical Transplant AlloSure for physicians clearly The year. company Innovation of symposium transplant in which patient. with clinical AlloSure. seven The capability is American kidney Seattle, We their kidney this June, a AlloSure's highlight transplantation include the experience symposium meeting large renowned

about excited number case are We studies of that the AlloSure. demonstrate of will utility the

and be to a the AlloSure Comprehensive highlight symposium, be Hopkins available Hospital, Daniel at data, hosting Dr. the Director a will CareDx Medical question-and-answer the session. will for of new press conference Following Brennan, Transplant Center John

Now shifting AlloMap. to

transplant impact the with we believe for range, XXXX. comprehensive a on we territories with quarter. we growth of The been great this, provides International community heart on the transplant excited volume seven various HeartCare building that from Southeast are broaden to first overall have receptivity US Transplantation. in has target quarter has New which This results. field heart medical to Notwithstanding and on But LA to York, X% their tailwind, heart under for gene common transplantation quarter our offering who solution was ISHLT, centers. donor it out volume translating and We dedicated still starting the our free our We that transplant and as territories weather well Heart a legacy Society test the increased us to system remind our account coverage team volumes managers disrupter in offering, have our quarter top, enables weather within testing integrate so AlloSure US science immune unique like in XXXX our adherence. patient test. CareDx improve combines managers, patient volume Eastern activity in focused the and and transplant a of AlloMap first the in we are liaisons, out. research HeartCare noticeable as care to as information patient launched With First inclement at across as to Chicago. cell fantastic. clinical the draw care, transplantations the our during increased test graft the offering DNA Central issues about remain strategy Lung during year-over-year areas, like recently to With that of growth our rejection now provide viewed based is service derived was surveillance. is as into it service several XX, HeartCare. an much We of multimodality the coordinators metropolitan surveillance, heart everyone the CareDx associates, had based impacted US major site field hear X,XXX expression would HeartCare, and

Now turning pre-transplant. to

US Olerup in the last to Our Olerup that of demand available Applied is customers. $X.X meet We're to now received the and QTYPE and million, and revenues our both approval a CE April has Biosystems platforms. European QTYPE in and decline market delay announced quarter and manufacturing our we legacy XXXX, up on efforts. SSP pre-transplant decreased XX% year product SBT reflecting development from Roche In Mark Olerup now scaling the

an and next-generation precision we driven significant and the availability path turnaround strategic the QTYPE for reminder, offering exclusive global solution. announced agreement represents recent leader HLA for data as CareDx, company's type accelerate in improvement week, and is creating help sequencing a commercialization This its important platforms another is that This CE partner for CareDx has HLA to licensing step should a Illumina transplantation As speed QTYPE us driver Mark its multiple growth for time. that and in fast chosen in on existing a Olerup require profitability. a transplantation samples business.

sole will a typing agreement, sequencing distributor sold solutions. next As the and products Illumina's are globally. HLA segment lead the currently of CareDx HLA These of the rapidly in growing TruSight result the generation be market

Illumina had CareDx these branding and progress to over of focused transferred finalize phase, of While to AlloSeq umbrella HLA, rights Illumina's through these in the new takes under commercialization Illumina AlloSeq practice. various Cell-free into clinical competitors CareDx the continue transplant will product I BMT technology and the will you developing products are AlloSeq. the CareDx NGS for generic exclusive NGS on will development products. and clinical as to AlloSeq products. an NGS talk at they their DNA. them now exciting deal, these be significant made applications NGS sell will have HLA

NGS best-in-class HLA BMT, be This will the time HLA hematopoietic it product. software transplant market. patients been to transplantation solid finalize solution AlloSeq organ the will evaluate important will from bone With changing be CareDx various the bone a allogeneic for and develop of applications. focus first existing will HLA of advancement significantly to transplantation the XXXX. level Strategically, into as us next-generation launched this development on to have the AlloSeq capture AlloSeq will The in sequencing in this a to XXXX. stem Illumina improve or our HLA offering. product proprietary made marrow NGS typing turnaround specimens an field. will hybrid in versus CareDx undergone of post-transplant We Firstly, enhancing of the transplant, is we the by and technology workflow cell product the BMT anticipate beginning a will recipient be that who expand enter available the blood offerings, half add developing cells will donor has make to marrow transplantation. AlloSeq in marrow bone for of technology field product allows

kitted DNA market with be CareDx head solution. plans dominated available and commercialize Illumina cell-free cell-free an agreement, the CareDx a will important DNA making evaluate DNA this by to has in the which development as diagnostics cell-free in-vitro in Finally, start diagnostic the offerings. we is a this to developing Cell-free countries on been to DNA This testing alpha by testing kitted advance version. anticipates developed get AlloSeq as solution.

we model. already As option a patient potentially Cell-free care line, product as DNA we in large an a today labs serving support of see distributed percentage better transplant with to AlloSeq are our Olerup

the not in As on have to expectations launch for generated this financial from evaluate Cell-free will our to finalized projections, line we agreement Illumina DNA. assumptions like AlloSeq add we would XXXX. customer Based offering, business for our our new top the

of to an business OpEx the the million. We significantly $X distributor like $X not will to anticipate agreement margins TruSight XX% increase and roughly see XX% to million gross of do Therefore, of on existing we development profitability non-GAAP headcount XXXX. this and XX of second to activities year. approximately impact lead will by new half to our in commercial in increase planned us These achieving XX our the goal EBITDA

to plan Illumina. next-generation team to pleased the field, David President Conexio, several to and David team the where was a Sayer, and He and to decades. his significantly sequencing has fortify by I'm strengthens technologies for expert very we experts Specifically, Illumina to testing's. He recently adding with the in came renowned we advanced of HLA his acquisition CareDx David and chosen CareDx. testing are pre-transplantation David field team welcome very with join CEO. our CareDx. have this This been considerably, in that pleased has of

uniquely additions sequencing information This will product medicine is the in these to solutions high personalized need, this further We to patient our population. enable provide transplantation. clinic. are with continuously delivering our next-generation to bring CareDx And to cost positioned portfolio, genomic high to transplant on promise

to Advisors. the recently and our to the with heading financials. a great term debt completion hand a and backbone have now with financials. I'll call to financial of Perceptive up team loan the Mike with flexibility us single to providing efforts We Mike, over done in announced remaining growth the you simplify refinancing balance discuss by Turning the our company sheet the growth. our our for and job support to

Mike Bell

you, Peter. Thank

$XX.X XX% first to testing our the XXXX year-over-year statement, first to revenue Turning income quarter increased million.

a AlloSure to X% AlloMap first the X,XXX X rate volume increased quarter Medicare tests, volume X,XXX in includes from revenue XXXX the X,XXX testing January to AlloMap of and tests increase Our reimbursement X,XXX.

We to launch revenue with pleased following very and of with trajectory the in be initial continue the with the line momentum expectations. test our AlloSure

Our Had ASC year's to new This of XXXX. revenue revenue recognition pre-transplant And to compared on quarter in revenue our impact X, quarter $X.X the representing revenue revenue million. impact in total the have standard, prior a total increase first minor as from first was the million. such, no had standard used We $XX.X of million, decreased XX% million. old XX% $XX.X the our XXXX XXXX adopted on the been year-over-year we a would revenue. revenue product very January and XXX $XX.X testing ASC recognition our XXX

million loss period of For $X.X compared the quarter a first non-GAAP was the net XXXX, million to loss our in net $X same of non-GAAP XXXX.

compared per share quarter $X.X same million. March was Our cash in our of our XXXX XXXX was $X.XX period non-GAAP the and XX, used to Net with net $X.XX in was of the equivalents the loss and million, first first activities in was cash in cash $XX.X line XXXX. quarter which at XXXX in expectations, operating

our over remaining a liquidity, Immediately XX following with $XX we within to mid-April interest mentioned, to million had in million With and Allenex As only majority proceeds in refinancing additional Peter the shareholders. sheet option an refinancing to $XX loan of our cash Bank months, off we and debt, next balance to Danske with we and in used our former have our is which from this the support period. completed the some the $XX $XX in the three-year million million growth approximately we term Perceptive from initiatives. debt debt million Perceptive $XX feel draw Advisors and of our approximately April, pay debt

guidance. to Turning

impact ramping progresses. towards given our and increasing for of million the contribution expectations as now growth driving are year. our reflect and We $XX million to our XXXX to on We of anticipate profitability, AlloSure XXXX revenue partnership, focused $XX the for and remain AlloSure expectations company the the Illumina

our profitability half positive Illumina, questions. and continue AlloMap XXXX. to the pre-transplant Medicare will from open from I we that, growth revenues second the non-GAAP of QTYPE, the for partnership Our reaching anticipate with during Olerup EBITDA price increase the With call of

Operator

[Operator go from is Jaffray. Instructions] Please from our And Bill Piper question first ahead. Quirk

Bill Quirk

Illumina that acquired or First much respect is with of newly distributed to from products? is question the the how new guidance, from the -

Peter Maag

Bill, excellent question.

in direct handing over closer actually overall I'll is as very of process is to integration Mike? are question as we X. the early to sales and obviously Mike, there numbers. which the are to the some intricately June We booking customers

Mike Bell

be over Illumina us over Yes, as we'll to months. the Peter transferring said, next revenue from six the

from the We business the million Illumina at $X half are year. in roughly of that looking second

for guidance, So that's in some the increase of AlloSure. the increase other on ramp the driver being the

Bill Quirk

that should Very good. AlloSure level aspirational now nice sound what's revenue with this so I And, aspirational the couple you I ago, guess, the Dare anymore? that? goal product overlaying I Illumina in deal new and and of comfort start ramp XXXX gave new some to aspirational say the with your guess, launches. about potentially Mike, just around quarters that generate thinking guidance, doesn't that very additional a

Mike Bell

Bill, we're that still at an aspirational goal. looking as

We'll guidance, end we're start I guidance as are still but of the focused revenue revised guidance looking of the obviously the I give for but year, aspirational, revenue additional products going the think at revenue that we're on mean, XXXX XXXX. at help. Illumina next to year, this

Bill Quirk

just Makes I question. of, a last give the me. us It's sense. housekeeping you And AlloMap AlloSure? guess, more and one just revenue split Can for between

Mike Bell

we're disclose revenue testing not out We number. an out. Bill, product, breaking the just doing that so not breaking the with we're did same the volume. overall We've product testing, giving been by

the So X,XXX tests quarter. AlloSure and in AlloMap X,XXX tests

Bill Quirk

it. Got you. Thank

Operator

ahead. next Our Per from Ostlund Craig-Hallum. from question is Please go

Per Ostlund

are that again being back start you prepared little if and could little come post the somebody further the patients a Want year a Peter, with participants? everything the discuss bit that to those much I sounds How seeing of you adopted tracking little along AlloSure. you're are your wonder tested similarly, the in test versus to line to non-DART of as that alluded And DART then bit allograft? offer mix expectations. are this that's it is your many in are test a mix to have were patients opting like of clinicians centers maybe first that curious very to versus AlloSure. It participants but that with with remarks, to

Peter Maag

AlloSure. And Diving of even Well, and AlloSure, say here to Per, the the all, first analyst two having much XX your things. That's our about of patient Terrific. really you expectations. to holding the so having results there you seen ahead very One I are X,XXX thank that much. are our against positively is would closer. to we surprised used probably are tracking great company is, [ph] now have we promotion standards expectations. The congratulations into cumulatively senior

Now when one patient look have things XXX. duration learned after of the into we that above that transplantation actually the you is is average

these put really on AlloSure. that on types So test after patients finding protocol. multiple of and back are useful suspicion are older they average, very originally transplantation we some where have them many come rejection because have on then the and patients in high in standards patients actually anticipated, that the And actually a AlloSure they an

we driving actually are first years' enrolled K-OAR we post-transplant, So for two are see this then we're the that these in the question utility patients centers did of there we adoption K-OAR, One, the quarter. in the in early with To using your demonstrates share it because which things us is XX many post-transplant, and the specific year test. three first two exciting on of and happening. AlloSure see now tests you

AlloSure approximation an roughly quarter, be XX the one the patients around you the XX, think of enrolled having you probably in K-OAR. X,XXX XX that if would gives patients each from in So first

Per Ostlund

did across versus in centers DART And sets? how being nicely Is about two that that spread then study participated those not? Okay. centers adoption the

Peter Maag

tests, is XX the most What where started centers of have an the really XX/XX actually is using of transplant on the really follows volume it centers. coming XX% that the confirming from rule, it that

I So that's it anticipated had we through. and what think really came

terms of how Now not no, centers, these DART in all necessarily.

were something We you have a and longer imagine, testing and that DART even some to actually institutions, presence. were get them, routine It have especially in all into really centers academic can high a large to a tertiary trials care of centers good high mix. academic protocol. volume takes XX

spread we're are with So I institutions. centers we but academic evenly to would so in these DART relationship centers, valuable have continue excellent distributed they important because these say and

Per Ostlund

on question may. if Very good. I One more AlloSure,

vast here, You mentioned rule kidney XX/XX talked centers majority of XXX having about know doing the Peter. the transplants. I you've

have early, yet, of are that again, what the from So centers would realizing the haven't is targeting front very, if you adoption test are necessarily center, that that very this there been pushback realizing And point? centers centers, into those adopted any of it's those the points? points and - at ledger kind are so, keeping push tipping the end

Peter Maag

unusual I have centers Per. he lot clinicians question, technology Woodward, here over than general to R&D, wanting me, different point many as patient difficult. any data, information. very actually care President they There with to and of is about so their been hospitals. has tertiary But Good more They these large have might population see talking very additional nothing is our data who in this think adoption years study is Robert like with Vice it's insight. and I that believe population additional transplant the more our has clinical a see

the But anticipated, that for mouse the because that have I we records questions you we making we we doing had done years. I think point. additional a which something of it's Maybe very medical that of know it electronic easy just for an have think the technology typical centers the Robert, to click. vantage adopt AlloMap and one by get is the into integration and key

Robert Woodward

Yes, thanks, Peter.

In just standard addition a sales activities. that things and to just numerous marketing are in

And presented I more. cases by to hey I've using really February caused centers seen. think, solved want this. side, saw that test the to symposium what the does our with to meeting in interest some done that we they're Peter initial the at looks lot by at again we held case users the of often you looks that CEoT of how certain of compare data exactly research the On where kind as start center, have a interested mentioned, that that like some were like

program ATC some seven audience we that our I variety of even strong attended and we and and have of the at an got matches we've that time used lunch for symposium centers see same a so program have application think and that's think, the larger a to And and with of that their will because expect really, to what they're presenters cause whether are what looking AlloSure for. use expectations with I going they've lot how this ATC

Per Ostlund

on excellent color. address for again me That's Peter. this prepared Last and did the remarks, question in AlloMap you

On I I would that of there of the there the focus a the genesis is of being might first Secondly, volume potentially of to question coming guess, there quantify going guess, have growth a little be, HeartCare because way weather. is any Thanks. the roughly part launch? ultimately impact then, AlloMap bit impacted you by back the do what driving forward? adoption piece was of envision to AlloSure it how lack AlloMap last HeartCare, And on been?

Peter Maag

AlloMap very range. Per, called clinical that that's time rigid comfortable to question. growing get very will traction. registry out through with we the growth it that targeted. is continue feel well, believe we [ph]. for but range is as - We'll HeartCare roll to it Well, Sure in volume We'll exciting thank much you this have between trial take a some this

to And come so it'll take time through. some

concept. the about excited are We

within caught in is up focus of the on quarter, this impact second going we the part the slower the as in and In then still forward. long terms as little adherence our of of gross specific on saw growth the but bit a more driving a quarter of we volume corridor, the beginning weather,

Per Ostlund

Excellent. Thank guys. you

Operator

question [Operator Chen is H.C. Yi from Instructions] Wainwright. Our go next from ahead. Please

Yi Chen

test. volume for AlloSure unit the up ramp on Congratulations

are and And and quarter higher the so first marketing quarters. significantly for I expenses, previous they your that than sales noticed G&A quite

I'm even are in just of Illumina products? will onetime you level So should future forward? quarters any Or expenses expense? expect once the Or increase going these start distributing was wondering, they we there the kind

Peter Maag

very to who question, actually excellent the divert Yi I'll Bell, details. Well, has again Thank Mike that Chen. you much. over

Mike Bell

Yes.

added sales account expense quarter and the and and the we've yes, marketing the pretty managers the increased reflects On much territory in marketing we've our that itself, quarter. territories fact sales four

with business, now has that QX as So there of costs expense foreseeable in for our time one $XXX,XXX some about future was which deal with $XXX,XXX, for flat then - the sales the base And with $X been that the did marketing on quarters. and QX of to itself expense the overall next in second stay year, $X increase us should expect reasonably about half Illumina we will million. always quarters. to mention to OpEx million this we the won't our in repeat audit by There

for the out modeling definitely you're if half year second numbers, So the that adding the enough. of should be

Yi Chen

Got you. it. Thank

Operator

Please actually follow-up question Bill Quirk have Jaffray. here ahead. We do from a from Piper go

Bill Quirk

AlloMap to to centers some resistant? historically expect Or On incrementally adoptions we try a should clean increase every to used this AlloMap been that of those going HeartCare in is patient product be get? that is this to had to to continue

Peter Maag

I by of lot believe it, we to follow-up the is Excellent to that continue protocol. the question. it different lack a answer by adherence think to center almost. center And What have be will we of

with to have a frequent these testings second multiple up first in the also the testing the the then signing third out roll in of and HeartCare for to which and the protocol it We centers hearts - what hearts, the and HeartCare protocol, is suggest might us hearts in the are be familiar you kidney the fourth. will patients the for that with sitting. follow-up rigorous to transplant we protocol allow call hearts where year So be the

we with So into we're the heart from HeartCare, what kidney learned establishing modality.

are So HeartCare we as anticipate that there adopting centers will volume be HeartCare. impact from a

Bill Quirk

of think goods Mike. cost a of gross question just AlloSure? lot guess over the you'll Presumably, makes for certainly billing additional to Peter. associated standpoint? AlloMap, flipping about presumably, with And but any margin to should a adding this sense me, Understood. from be I we you're How

Mike Bell

in additional sort adding expected the on on Bill of It shouldn't variable year, have the the AlloSure-Heart. be impact volume. we'll a based cost Yes, for this margins significant gross

significant any margin to XX% year, those in on so be targeting with shouldn't impact gross So the throughout XX% that. there

Bill Quirk

Okay, got it. you. Thank

Operator

you. to to the closing I'd question-and-answer back management concludes floor Thank This over comments. the for any like turn session.

Peter Maag

very you much. thank Well,

are I'm you Thank much. We forward joining business transplantation. and call building our on progress looking information our CareDx. Thank excited you very and at making to very continuously much as around are so you we for genomic updating

Operator

today's concludes This teleconference.

You you this participation. for time. may at your lines Thank disconnect your

CareDx (CDNA) 13 May 182018 Q1 Earnings call transcript