Hello, and welcome to the 46th Annual Canaccord Genuity Growth Conference. I'm Alex Fukasen, and I'm a Member of the Life Science Tools and Diagnostics team here at Canaccord Genuity, and we're pleased to have Biodesix here with us today. The company leverages multi-omics and artificial intelligence to provide diagnostic solutions with a focus on lung disease. Biodesix is the first company to offer five blood-based Medicare-covered tests for the same patient population with best-in-class turnaround times. Representing the company, we have Scott Hutton, CEO, and Robin Cowie, CFO. Thanks for joining us today. Thank you. Thanks, Alex. So to start, could you just provide a brief overview of Biodesix for everyone here, as well as some of the highlights of recent business performance and some key drivers of 2Q revenue? Yeah, to build off your wonderful description and introduction, as Alex said, we have five on-market tests for lung cancer, positively impacting that continuum of care. The first two are pre-cancer diagnosis, where we help physicians identify those lung nodules that are likely malignant or likely benign. Then post-cancer diagnosis, three tests that help with treatment or therapy guidance and selection. We also have a diagnostic development services portion of the business where we partner and collaborate with biopharmaceutical companies, other diagnostic companies, and partners. There, we're doing test discovery, development, we're supporting clinical trial research, and providing molecular insights at different time points. It's really critical. That portion of the business accounts for just under 10% of our annual revenue. As Alex highlighted, exceptionally strong growth. We've taken great pride in building out the commercial channel that we have. We now have over 100 sales reps in the United States focused on this call point, and the main call point being pulmonology, but now supported with a concerted, intentional effort in primary care. The growth recently has been fueled by sales force expansion. We're very excited to continue to grow and invest in that sales channel. We have disclosed that we'll end this year at approximately 120 contributing sales reps. We also expanded last year into primary care in a very intentional way, where we're focusing on the pulmonology referral pathway, supporting those primary care physicians that are referring patients in to pulmonologists. Lastly, we came out with an exceptionally large clinical trial result earlier this year, or study result, where we were able to expand utilization of the Nodify CDT test in those nodules that are 4 mm to just under 8 mm. That expansion was received exceptionally well. You reaffirmed full-year guidance of $108 million-$114 million, so midpoint around 25% year-over-year growth. You maintained your expectations of achieving positive adjusted EBITDA on a run-rate basis in the near term. Given the strength in the first half, how should we think about the assumptions embedded in the second half outlook, and what are some of the key swing factors that could drive performance towards the higher low point of that guidance? Yeah, I just referenced those smaller nodules. We just introduced that a couple of months ago, so we're still seeing broad adoption across both primary care and pulmonology, and with new ordering physicians and those that have ordered for some time. We feel very strong that that can continue to drive excellent growth and expansion in the second half of the year. We had a strong year-over-year comp from last year, so we think that we've set ourselves up for continued sustainable growth for a period of time. And you highlighted it, we are very focused on this march towards profitability. There are not many diagnostic companies that have achieved it and maintained it, and we think it's critically important to do so. Just building off of that march towards profitability, beyond the near-term drivers of your profitability ramp, how should we think about your path to free cash flow break-even? Yeah. Robin, do you want to take that? Yeah. It's heavily dependent on the growth of the top line. But in addition to that, we have a very cost-disciplined approach to our operations. As we've seen over the last several quarters, strong and growing operational leverage, and it's continuing that cost discipline approach and combining with improved rep productivity and new sales reps to reach and maintain profitability. Great. Moving back to the commercial organization a bit, you just spoke to it a bit. You have around 104 sales representatives in the field in 2Q, continuing to ramp towards that 120 towards year-end. How should we think about the upper bound in terms of what you are targeting over time for your sales force, and how do you balance the opportunity to accelerate hiring against the objective of maintaining operating leverage and progressing towards profitability as well? Yeah, I think the key word there was balance. There really is a balance. Could we grow faster? Certainly. We want to be mindful of bringing on the right sales professional, putting them in the right position to be a success, and then giving them an opportunity to scale and contribute. For us, we have consistently hired about six to eight sales professionals a quarter. That is what this plan supported this year. As we look towards next year, right now, we are currently planning on doing the same next year. I think you bring up a good point, which is how much more do we have to grow and invest? I think by the end of next year, I think we will have great representation and coverage. Then we can be opportunistic as we bring on an exceptionally large account, and we need support, invest in that. We are getting there and I think we have demonstrated we have a very efficient, effective model. Our industry-leading gross margins at north of 82%, we have continued to guide that those will stay exceptionally strong. It really is about taking a cost-conscious, very concerted effort to make sure that this is a long-term investment that everybody can see providing a return. Great. Moving towards the primary care aspect of your sales force, volumes on that end increased 133% year-over-year, and they still represent around 15% of total volume, so that is kind of consistent with last quarter. How are you thinking about this dynamic? Should we expect PCP volumes to stay around those levels, or do you believe realistically, this ratio could kind of fluctuate over time? I think it's going to fluctuate. I think a year ago, we went from 8%-11%, as you highlighted. Last two quarters have been at 15%. For us, it really is about ensuring that we can get to those patients that are in primary care. The denominator is smaller, right? We've been doing it a significantly less time. As it continues to grow, we think there's going to be good balance across both primary care and pulmonology. We referenced the sales force expansion this year. The majority of the sales reps we've hired this year have been in primary care, so we've invested in that, and so we fully expect it to continue to grow. The 15% that you referenced, for us, what really offset that was 31% growth in pulmonology. For us, we felt like that was exceptionally strong and a very mature effort, and we were proud to see that, and we fully expect both to grow equally strong. Just sticking with the primary care sales force here, what have you learned about the adoption curve among the primary care physicians relative to the pulmonologists? Yeah. Great question. It's one of the greatest insights. Primary care physicians are well informed and knowledgeable about molecular testing and diagnostics. Pulmonologists historically haven't been. We were the first, and we're the only company offering this, so we do a lot of education, a lot of training, a lot of discussions about how it fits into their workflow. When you walk into a primary care physician, they're constantly ordering diagnostics, right? Secondarily, pulmonologists, when we started, did not have blood draw or phlebotomy capabilities. We built that network out to support that growth. When you go into primary care, they not only have that, oftentimes they have a blood draw facility adjacent, right on site. There are a lot of learnings that would demonstrate that primary care, it's an easier yes. You can get in. They understand the value. The difference being is that they see a broader base of patients. A pulmonologist, we know that on any given day, you are going to see a lot of patients that have a higher likelihood of Nodify testing. One theme from the quarter that we touched on really briefly already was recent small nodule clinical data, and that is a potential growth driver going forward. Could you just provide some additional color about this study and what the data showed, and how does this evidence change the way physicians think about blood-based testing across the lung nodule? Yeah. Robin, do you want to take that one? Yes, happily. Our test, and this is really focusing on Nodify CDT, was validated in a broad population, but this was looking at over 1,000 different patients and various subgroups. Physicians have a lot of questions about where to order the tests, and normally when they start, they start with a narrow band of patients. This publication showed that we could identify patients that were likely malignant without significant increase in false positives, showing them that in these different subgroups, that the test works really well and can help them. That was published in late first quarter, and we had a lot of physician demand. When that came out, we saw really nice growth from physicians, not just in the small nodules, but then because the test is more top of mind, they remember to order it in more of their broader patient population. We saw a nice increase in tests per physician. Great. Are you seeing this pattern consistently across both primary care and pulmonology? Yes, it's been very consistent. Yeah. Not only the demand for ordering in the smaller nodules, but also the increased ordering by physician when they start and adopt a larger patient population. Let's turn to ASP just for a quick second, and reimbursement as well. You noted average revenue per test improved year-over-year due to some expanded payer coverage and continued RCM improvements that you continuously do sequentially every quarter. What are some of the primary levers available to drive additional ASP expansion from here? Could you just kind of talk about, perhaps break down if the expansion was more so driven by Nodify CDT, that was a big focus of the quarter, or was it kind of broad based across Nodify testing and perhaps VeriStrat as well? We saw new coverage policies and contracts for Nodify CDT, XL2, and VeriStrat. We saw nice ASP growth across each of those three tests. Nodify XL2 is a higher price point, so as a contributor, it's a larger contributor to our revenue, but the adoption from payers has been consistent with CDT and XL2. Big drivers of payer adoption are guidelines and really demand. As more physicians order, and believe in the test and see utility in the test, that puts pressure on the payers. Other payers want to follow somebody else making a policy. As you get more and more coverage policies, you build momentum in the payer space as well. Speaking about the payers, my next question, could you just provide an update on how those private payer contracting efforts are going? Any material updates that you can give us on that end? Yeah, we've been really consistent, so we take a very consistent approach to our private payers, so wanting to ensure that patient access and payment rates are consistent across our payer groups. That's a strategic focus for our market access team. Let's look at margin scalability for a second here. You just spoke to your gross margins, about 82% in this quarter. You are guiding towards around the 80% mark for the full year. Extremely strong for the category, just diagnostics in general. Gross margins at the 80% level. Is this sustainable long term? What levers are there left to move to, I don't know, for any more incremental expansion there? They are already insanely high, but just. Yeah, we are very proud of them. As I mentioned, we have a very cost-disciplined approach. We also spend a lot of time on our operational efforts to try and continue to make changes and improvements to increase efficacy and efficiency. We think that maintaining in that low 80% is absolutely viable, although we are continuing additional projects to try and make improvements. I am always hesitant to promise additional improvements when we are already above 80%, but it remains an important key focus for us operationally. Speaking about operations, as volumes continue to expand, sequentially just fantastic volume growth from some of the dynamics you just discussed, how should we think about future laboratory investment relative to gross margin and capital efficiency? Part of the projects that we have been working on improving our laboratory processes means that we have made significant improvements in our capacity. So we have got years of capacity before we would need any material investment other than just refreshing equipment. Let's talk about your development services portfolio. Obviously, you spoke around 10% of revenue roughly, but still it's something important to discuss here. Looking at 1Q, you had a pull forward, looking at 2Q, sequentially down a bit, but biopharma biotech funding has been improving. You briefly touched on some of the dynamics at play there. You've spoken in the past about traditionally sequential improvements in the contracted revenue there. Can you just elaborate on the health of that business, and where do you see that as a percentage of overall revenue and as a percentage of just your overall business offering over time? Yeah, it's a great question. I highlighted earlier that it's critically important to us. That business provides insights into what biopharmaceutical companies are exploring, where they're investing, and where they anticipate trying to positively impact patient care. It also gives us the opportunity to partner with other diagnostic companies collaborating on other tests. Those insights are invaluable. It has consistently ranged anywhere from 6%-10-ish% of our annual revenue. We fully anticipate that it'll be there this year and next year. We think that's a good trajectory for us. We've got five team members that focus on that, so their sales rep productivity is exceptionally high and large. We feel really good about that. We think it's an exceptional team. They've built really strong, trusted, collaborative relationships. For them, as they continue to engage with biopharmaceutical companies and diagnostic partners, we're really looking for continuation of ongoing studies and expansion. We've seen nice growth there. You highlighted what we call in term dollars under contract, but not yet recognized. We've seen significant improvement and growth in that over time. We fully expect that to be the case. That team is out there meeting with a number of biopharmaceutical companies on a weekly basis, so we think we've put ourselves in a good position to offer our broad portfolio of tests, but to also offer our testing services and our capabilities. The ability to help discover and develop bespoke assays, those things are differentiators for us. Robin Cowie highlighted the gross margins. We've demonstrated that we can offer a test that has a strong gross margin, has rapid turnaround times, and both of those things create value for those partners. So we fully expect to share more on that growth and expansion, and we're eager to disclose more because we think we've got some exciting things currently being discussed. You have had a lot of success with your five Medicare-covered tests. I think something could be important to touch upon here would be your pipeline, especially given your planned R&D update around the November AMP meeting. Could you frame the broader pipeline opportunity and how you are prioritizing opportunities across risk of recurrence or ROR pipeline test, MRD, VeriStrat and prostate cancer, and other potential oncology applications? Yeah. We highlighted going back towards the middle to end of the pandemic, a partnership that we engaged in with Memorial Sloan Kettering Cancer Center. In our partnership with them, that is what has fueled a number of these activities. It is extremely collaborative and engaging. They provide the clinical data, the patient outcomes, and the samples. We provide the knowhow, the equipment, and we are collaborating on not only discovering and developing new tests, but looking at some of our existing tests and can we expand utilization. I think that is the way to think about VeriStrat. VeriStrat was our first test discovered. It is a very unique test in the sense that it, in essence, measures a patient's immune status. As you think of a patient battling a cancer or a disease, what we really want to highlight is has the cancer subverted the immune system or compromised the immune system? If so, whatever treatment they are on, pivot to another treatment because that one is not working. That has benefited us for years. That data is exceptionally robust. The clinical trial we had around VeriStrat was INSIGHT. It is over 5,000 patients with a number of different treatments. We have closed that study and are currently targeting ASCO of next year to begin publishing. We think that will continue to fuel some of the discovery and development efforts that will enable our pipeline. Now, that fits more into the latter half. That is post-cancer diagnosis where we focus on treatment guidance and therapy selection. We feel that that is still a robust field. There is a lot of investment there, and that is also where we would put the risk of recurrence in MRD efforts. MRD right now is exceptionally hot and prominent. We all can understand and see the value from ongoing surveillance and monitoring. We feel like we are going to have a unique offering, and we are eager to start to disclose more about that here in November at the AMP meeting. That's great. To what extent can you leverage existing lung-focused commercial infrastructure, pay relationships, and your clinical evidence platform as well? Yeah. I think when we started Biodesix, we really were focused on building the best diagnostic company possible. Whether it's our quality management system, our clinical tools, we built them as if we were going to be a Fortune 500 company. Robin highlighted infrastructure investment is minimal. Internal team investment is minimal. Capabilities, minimal investment needed. Is there opportunity to scale and leverage that? There certainly is. As we add additional products, and even as we expand our biopharmaceutical partnerships, we can leverage that team. We highlighted the cost discipline approach, and we've run very lean. We think we can continue to do so and be very opportunistic as we expand into potentially other disease states. More importantly, continuing to ensure that our lung-focused sales team has more products in their bag. Inclusion into the Fortune 500, great goal to have. Just thinking, I guess perhaps more medium term, how should we think about the pipeline's potential contribution to your growth profile beyond Nodify, I guess? Yeah. Obviously, we have to get there. We have to develop the products, we have to have the clinical data, and then we have to get the reimbursement. You never want to underappreciate all that goes into that. We have a strong team that's done it repeatedly, and so I feel very confident in our ability to do so. I highlighted the MRD space. It is a massive addressable market. I think there's room for a number of competitors, and so I think that has the ability to be significant and material. It won't be in the next 6-12 months. It's going to be further out than that. Our pipeline is still on the horizon. It's not something that's imminent. As we talk through what we're doing at AMP and give greater detail, I think you'll start to see the cadence and the timeline and how all that slots. I will state, we're very eager to continue to demonstrate what our development team not only can do, but what they have done, and they continue to do. We think we've got one of the best development teams and laboratory service teams, and I think it'll be an exciting opportunity to demonstrate that. Looking at some of your more important studies here, let's clarify for a brief second. For those who may be less familiar with the study, could you discuss some of the key findings from the interim analysis and why they're important, and what metrics and milestones are you most focused on for the future readouts? Yeah. We kicked off CLARIFY almost two years ago now. It is a retrospective study. What we did is we went into some of our larger orders of Nodify. We pulled those patients that had received Nodify testing and were able to immediately document what was the one-year outcome and the two-year outcome. We're able to look at comorbidities, other things by doing that chart review. It really becomes a database and a repository by which we can pull and mine data. We've got over 2,000 patients enrolled now. All of them with minimum one-year follow-up, many with two-year follow-up. We began, as you said, slicing and dicing that. We did an interim analysis. We have a number of studies that we have submitted for publication. Can't discuss many of those until they're accepted and out of embargo. The best way to think about it is we're looking to not only reinforce clinical utility that we already have but start to expand utilization. One of those that's out on the horizon that I'm eager to talk about is, we have done an analysis of Nodify testing compared to PET scans. We feel confidently that we're going to be favorable in that comparison. Putting that out there so that physicians don't just blindly order a PET scan for every single lung patient and then ignore it. Instead of spending money, let's actually do something like a blood-based test that gives us actionable results in a shorter period of time with a more positive outcome. That's how we're looking at that. It really is about being aggressive, being competitive, expanding, and broadening utilization possibility. There's a number of other comparators, like time to diagnosis. We're also looking at stage shift. Will the utilization of Nodify allow physicians to identify cancer sooner? The one thing that we all know, regardless of the cancer type, if you can identify and detect that cancer sooner, you increase the likelihood of a positive outcome. We're eager to present and publish more on that. Right now it's quite a valuable resource towards us, and we'll continue to invest in it. You kind of touched on it really briefly, but anything you can just elaborate on really briefly about any upcoming publications or presentations or potential data around CHEST or AMP? What should we think about, like, the cadence of evidence generation over the next, like, 12-18 months? Yeah. We've always valued data. Robin highlighted kind of our reimbursement strategy, our strong pricing. That doesn't happen without good data development. We're constantly looking to mine data and publish and present. We aren't so much focused on holding it for CHEST or AMP or ASCO. We really want a regular cadence of publications out there. I highlighted the INSIGHT study and referenced that we're really timing is setting us up for ASCO, hopefully there. CLARIFY is going to be an ongoing effort at all times. We also had our prospective randomized trial called ALTITUDE. We've currently stopped enrolling. Now we're monitoring those patients to a minimum of one-year follow-up. That won't occur until later this year. That's something we'll be looking at for next year. But we're going to continue to ensure that anything that we push out as a product has good data to support its clinical use, and the Nodify test right now have the broadest base of both clinical evidence and clinical validity on the market for anything in lung nodule management. We're proud of that, and we're going to continue to invest in it. We have time for maybe one or two more really briefly. Just on competition, you've previously noted there's basically no direct competitors that provide meaningful competition, and it could remain many years away, perhaps three to five years. What do you view as one of the largest barriers to entry in this market specifically? Yeah. Before we get to barriers, it's why is there an opportunity? I think many forget that lung cancer is still the deadliest of all cancers in the United States. We've made significant progress with smoking cessation and awareness, but on an annual basis, we see more and more people diagnosed with lung cancer that are never smokers. It highlights that this disease is not going away. I also look at it and say there have been a lot of, whether it's drugs, treatments, diagnostics, that have failed. It's hard. It's difficult. Which hence is why it's one of the deadliest. More people in the United States will die of lung cancer this year than colorectal, prostate, and breast combined. That's the opportunity. We need competition. We need more investment. We welcome it. I think it's in the diagnostic front, the test with the best data should win. I think for us, we've distanced ourselves from competition by building a really strong IP portfolio. We talked about investment in that data development. We don't take that lightly. We want to take that as an advantage. Most importantly, we have the only direct sales force focused on pulmonology. With over 100 sales reps, we fully welcome the opportunity to collaborate with others, bring new tests into the bag, like we're planning on doing. For us, I think there needs to be more investment. We need to do a better job with awareness. Unfortunately, screening has not been a great success in the United States. The best you can see in the literature is that maybe 10%-15% of the screen-eligible population currently participates in a screening program. Something has to change there. We're big supporters and fans of the multi-cancer and single early cancer detection test that are focused in this arena, and those will positively impact this space and benefit us. You just led me into my last question. There is one last fun one to finish with. Obviously, you sit on the diagnostic end of this landscape. There is more and more conversation about blood-based biomarker testing, and potentially specifically for lung cancer, and usually the high-risk population. The way these are formulated is preferably with really high sensitivity, and they can afford lower specificity because inevitably a false positive just leads to adherence to computed tomography or CT scans, which is 10%-15% adherence rate. That works as well. You essentially could benefit from this tailwind or perhaps the fun question is, would you ever be open to either developing internally or acquiring some type of screening technology? Yeah, it is a great question. It is a massive opportunity. The short answer is yes. What we know by looking at others is it is expensive, it is timely. There are four to five, maybe even six others that are significantly ahead of us. We are more interested in seeing what their data looks like. I think you highlighted it. A false positive is not necessarily that bad unless 99 out of 100 are false positives, and then you have got to figure out how do we find that needle in the haystack. That is where we come in, and I think that there could be great synergies there. Regardless, rising tide will raise all ships. I think any single cancer or multi-cancer early detection test focused on lung benefits us immensely because of what you said. They are going to bring more of the screen-eligible population into play. After that CT scan, most physicians are going to start adopting Nodify. We are supporters of theirs. We are eager for them to have success. If something was to come our way, especially now that we have the expanded call point into primary care and pulmonology, we will be very opportunistic. Alrighty. Thank you very much, everyone. Yeah, thank you. Thank you. Yeah, appreciate it.