Greetings, welcome to the CareDx Incorporated First Quarter 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the onefour followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Wednesday, May 10th, 2023. It is now my pleasure to turn the conference over to Greg from the Gilmartin Group. Please go ahead. Thank you, Jennifer. Good afternoon, and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ending March 31st, 2023. The release is currently available on the company's website at www.CareDx.com. Reg Seeto, Chief Executive Officer, Abhishek Jain, Chief Financial Officer, Alex Johnson, President of Patient and Testing Services, and Robert Woodward, Senior Vice President of R&D, will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of the federal 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 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 description 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, May tenth, 2023. CareDx disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or forward-looking statements, whether because of new information, future events, or otherwise. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release filed with the SEC. I will now turn the call over to Reg. Thanks, Greg. Good afternoon, everyone, and thank you for joining us for CareDx's first quarter 2023 earnings conference call. As you'll recall, we ended 2023 having been through a challenging environment in 2022. The four key challenges identified included the growth of the transplant market, marking the idea of the low point in transplants since the onset of COVID at the start of 2022. Changes in expectations in diagnostic sector, where we focus on achieving profitability and maintaining strong cash position. Three, an increase in the commercial payer mix with the full impact of Medicare Advantage and the increase in our commercial testing services volumes with new launches. Four, driving revenue growth also in our non-testing service business lines. I will address the revised billing articles from MolDx shortly. Before I do, I would like to highlight our strong operational performance that saw a successfully executed plan to address those four challenges. We continued that effort into Q1 2023, where the company. One, delivered its highest-ever patient testing services volume and grew faster than market by 8 share points compared to the prior quarter. Two, we delivered cash collections at 110% of testing services revenues for a second consecutive quarter, representing approximately 10% year-over-year increase. This maintained our strong cash position of $286 million and helped generate $0.7 million in net cash from operating activities. Three, we delivered our highest non-Medicare revenues through improved pay coverage and collections with a 19% increase in sequential revenues. Four, we delivered our highest-ever patient and digital solutions revenue quarter as we doubled our contribution from our non-testing services business line. We're proud of these results and the strong operational performance and execution in Q1 2023. Moving on to the billing article changes. We're now faced again with a new set of challenges with the introduction of two revisions to the billing article associated with Medicare coverage of AlloSure and AlloMap. The first revision was published on March 2nd, and the second on May 4th, 2023. Addressing these changes required significant management time and the reallocation of organizational resources. We've updated our 2023 plan, which is now largely focused on the operational implementation of the requirements of the billing articles. This will require significant and ongoing effort throughout 2023. In parallel, we're aligning the company's cost structure to this new and evolving landscape. Notwithstanding our focus on implementation, the company believes the billing articles are inconsistent with the LCDs, both Noridian and MolDx's response to public comments explaining the intended scope of various LCDs and medical necessity. We believe the billing articles were changes to the LCD and not merely a clarification of existing coverage by MolDx for kidney services. For example, in HeartCare, MolDx direction has changed, and they acknowledge that the March billing article is a change as to its previous billing article, which provided coverage only when AlloSure Heart was used in conjunction with AlloMap Heart. Adding to this complexity, there is uncertainty whether and when Noridian, our Medicare Administrative Contractor, also known as a MAC, will adopt and issue these new billing articles. To date, they have not adopted either billing article from MolDx. Given these factors and out of an abundance of caution, we adopted a conservative approach and paused Medicare reimbursement submissions for AlloSure Kidney on March 7, 2023. The board and management team made this decision in consultation with third-party advisors. The decision is designed to give the company further time to understand and evaluate the implications of March billing article. We did not submit claims for approximately 3,200 AlloSure Kidney tests for Medicare reimbursement and did not recognize this revenue, representing approximately $8.9 million on these tests in the first quarter of 2023. We refer to these tests as the impacted March tests. We plan to submit these tests during Q2. We've had numerous discussions with MolDx and plan to have further discussions with them. We've also reached out to CMS on this matter and plan to reach out to Noridian. While the transplant centers and CareDx will adjust and evolve over time, what has been concerning is the impact to patient care during this time of evolution and uncertainty. It was unrealistic to have a four-week implementation timeline from when the March billing article revision was issued. Thousands of providers involved in the care of patients had to be educated on new forms and processes. Despite this being a near impossible feat, we're focused the organization on these hundreds of centers and practices who were not ready for this change nor had planned for this change, especially the centers who were required to update their IT systems. The transplant community has spoken out over the last few weeks on this unprecedented situation. The leading professional transplant associations, ASTS, AST, and ISHLT, the leading patient associations, NKF, and TRI, have all reached out to MolDx Direct in this matter. They also reiterated the importance of non-invasive molecular testing in transplant patient care, some went as far as to raise concerns about the implementation timeline and process and implications of patient care. In fact, on Monday, a press release was sent out highlighting the results of a new survey conducted by four leading patient groups, Transplant Life Foundation, Transplant Families, Transplant Recipients International Organization, and the Heart Brothers Foundation, showing that 95% of patients surveyed are concerned that the new Medicare billing article limits coverage of non-invasive post-transplant tests. Furthermore, the majority of patients surveyed believe that reduced coverage of non-invasive blood tests would negatively impact their post-transplant care, and they should have been consulted as part of the process for Medicare policy changes. The survey included the views of over 1,000 patients as well as caregivers and families. Now on to Q1 results. Testing services had a great first quarter with 17% year-over-year volume growth. We delivered almost 50,000 tests, beating the year-over-year market growth of 10%. We also grew sequentially by 5% versus last quarter, beating the -3% quarter-over-quarter market growth. In Q1, we recorded a total revenue of $77.3 million. If we had submitted the impacted March test to Medicare in the first quarter, our total revenue would have been approximately $86.2 million, a year-over-year increase of 9%. In addition, our testing services revenue would have grown 6% to $70.7 million. Q1 would have been a record quarter for CareDx if we factor in the impacted tests that we plan to submit to Medicare in Q2. Our non-testing services business continues to deliver meaningful contributions to our overall revenues. Specifically, patient and digital solutions delivered their highest-ever revenues of $8.6 million, representing a 39% year-over-year growth. For the first quarter, we reported GAAP loss of $23.7 million and a non-GAAP loss of $5.8 million and adjusted EBITDA loss of $6.4 million. If we'd included the revenue from the impacted March test, we would have recorded a positive adjusted EBITDA of $2.5 million. Notably, we would have achieved our key 2023 goal, which was to deliver a positive adjusted EBITDA in the first half of 2023. Abhishek will cover this in more detail in his section. Now I'll update you on our efforts to operationalize the changes by the March 31st effective date and the ongoing complexities. Firstly, it has taken a lot of effort and will require ongoing effort to support continued patient care. Since the March billing article was announced, we've been working nonstop to update our forms, our systems, and processes to accommodate these changes. This has been a significant undertaking across our testing services business line. While the following is not an exhaustive list of what the company has been doing since March 2nd, it is truly amazing what has been accomplished over the past nine weeks. Since the start of the billing article, we've reached out to 80% of our 550-plus transplant centers, community hospitals, and practices. Each center, hospital, and practice has multiple providers and support staff that have to be educated, requiring us to visit numerous times, with some centers having more than 20 people that need to be educated. This has involved thousands of interactions. We've had to update our internal IT system processes and Test Requisition Forms, also called TRFs, and workflows. All centers using paper TRFs have had to be updated with new requirements, and centers using our portal are now being migrated over to our new customer care portal. All centers using electronic medical records are being worked on as part of this process, and we are dependent on the center adjusting its system workflows. Changes to IT systems need to be scheduled well in advance and working on these center by center. The effective date for implementation was only four weeks after the billing article revision. It should be noted we began our efforts to operationally implement the March billing article requirements during March to be ready by the effective date of March 31st. We've made excellent progress, it takes time for transplant centers and healthcare systems to make these operational changes and update their system workflows. We can report now, as of the end of April, approximately 50% of the test orders received are now in the new forms and with the new required information. It has taken a Herculean effort to get to this stage. We continue making strong progress on the operational implementation, we will not be completed by the end of the second quarter. As an indicator of this uptake and adoption, we've seen a progressive increase in percentage of completed submitted forms. We ended April, as we mentioned, 50%, and we're trending in May at 60%, and we expect to be at 80%-85% of forms with requisite information by the start of the fourth quarter as more transplant center systems are updated. Given the impact of the March billing article to our business model, we have taken steps to reshape the organization, which will deliver annualized cost savings of $40 million-$50 million. Abhishek will cover this in greater detail in his section. Moving on to guidance. Given the uncertainties between interpreting MolDx, Noridian positions, and our operational implementation taking time, we believe it is prudent to withdraw guidance. We will revisit this in our next quarterly earnings call once we've gained a better understanding of this evolving landscape. What are the next steps for CareDx? Firstly, we will implement the updated 2023 plan in response to the revised billing articles by continuing the all-hands-on-deck approach to operationalize the plan, physicians, centers, and practices. Alex Johnson and his team have done a fantastic job working day and night to get this implemented. We're gonna align the organizational structure and strategy as the landscape evolves. The management team's been working on this, and that effort's also being led by Abhishek, our CFO. We're gonna be following up with MolDX, Noridian, CMS about these changes. Secondly, we'll continue to deliver on the 2023 plan, especially the three Cs. On collections, we have made significant progress over the last two quarters while testing services collections are greater than testing services revenues. On coverage, we have captured wins from the recent ISHLT guidelines, especially with earlier reimbursement for AlloSure as early as two months. We're in multiple active discussions to increase commercial coverage. There's been significant work as part of our strategic plan where we now expect to see this to come together over the next few months. On catalysts, we await decisions and have ongoing discussions with several pipeline catalysts. Given the recent BA changes, some of these dossiers have been updated. We'll continue to produce and submit clinical data demonstrating the clinical benefits of our individual diagnostic tests and our multimodality offerings, including HeartCare. Lastly, the company will be leaner, more efficient, and aligned to the new and evolving landscape. We have enough cash on our balance sheet. We do not anticipate needing to raise any cash in the near future. Before I hand the call over to Abhishek to go over the financials, I wanna thank all the employees of CareDx who have worked tirelessly to educate healthcare providers on the billing article changes and to help transplant centers become operationally ready. The efforts were exemplarily driven by their unwavering commitment to serving patients and the broader transplant ecosystem. Handing over to Abhishek. Thank you, Reg. We are pleased to share results from the first quarter. The key takeaways are, Number one, we had a good quarter despite the operational challenges associated with the implementation of the billing article. Number two, we have some early lead indicators to start assessing the financial impact of the billing article. Number three, we now have plans underway to mitigate the financial impact. Number four, we are withdrawing guidance due to the factors outside of our control. We had a good first quarter where we delivered on our financial imperatives. Number one, we maintained a solid cash position of $286 million and generated positive cash from operations for a second consecutive quarter. Number two, our testing services volume growth beat market growth quarter-over-quarter and year-over-year. Number three, we maintained our momentum in collections that increased 10% year-over-year and were at 110% of our reported testing services revenues. The impact of improved collections has started to show on ASP dynamics. Number four, we had our highest ever quarterly revenues for patient and digital services business. Number five, all three businesses improved gross margin year-over-year. It would have been a record quarter if we were to consider revenue associated with the impacted March test of $8.9 million, as we would have then reported our highest ever testing services revenue and reported a positive adjusted EBITDA. Let me provide details. Firstly, with revenues. In Q1, we reported total revenues of $77.3 million, down 3% year-over-year. If we were to include the revenue associated with impacted March test, we would have delivered revenues of $86.2 million or adjusted revenue, representing a 5% increase as compared to the last quarter and 9% year-over-year. This would have been our highest ever revenue in a quarter. Testing services revenue for the first quarter was $61.8 million, down 7% year-over-year. Testing services revenue, including the revenue associated with impacted March tests, would have been $70.7 million, our highest ever testing services revenue in a quarter or adjusted testing services revenue, representing 8% growth as compared to last quarter and 6% year-over-year. Our testing services volumes grew by 5% quarter-over-quarter as compared to a negative 3% growth for the transplant volumes. Also, our testing volume growth of 17% year-over-year beat the market growth of 10%. Despite tough market conditions, strong test volume growth demonstrates the value of our tests with proven clinical utility. Turning to ASP. Adjusted testing services revenue growth of 8% outpaced volume growth of 5% or would have delivered a positive overall ASP change, an inflection point that we have been seeking with our focused strategic efforts. In Q1 2023, we would have improved the ASP despite the continued headwinds from volume mix shift, primarily driven by, number one, getting paid for long outstanding Medicare Advantage claims, and number two, having an increased price per test as a result of improved collections in Q4 2022. As a reminder, we use historical collections per test to recognize our revenues for non-Medicare tests in a given quarter. ASP on our paid test continues to be approximately $2,500. We track this measure to exclude the impact of mix shift as a result of our strategy and market dynamics as we had discussed in the past. This is a metric that we use to ensure that there is no price degradation for our tests. Turning to testing services gross margin. Our GAAP testing services gross margin improved to 75% as compared to 73% in the same quarter last year, and non-GAAP testing services gross margin improved to 77% as compared to 74% in the same quarter last year. Half of this improvement in gross margin was driven by volume growth and the impact of improved collections on revenues. The rest of the gross margin improvement was driven by two factors. Number one, the positive impact of one-time reversal of accrued amount associated with royalty payment. It was partially offset by the impact on gross margin due to unrecognized revenues of $8.9 million associated with impacted March test. The cost of running these tests has been part of cost of sales. Turning to non-testing services business. In Q1, our digital and patient solutions business revenue was at $8.6 million, a growth of 39% year-over-year. Our highest ever for a given quarter for this business line. We are pleased to see our strategy of investing in our digital and patient solutions paying off. Our acquisitions helping us both drive the business results and strengthen our mode. GAAP and non-GAAP gross margin for our digital and patient solutions business were 23% and 31% in the first quarter of 2023, as compared to 21% and 28% in same quarter last year. Though the non-GAAP gross margin improved by 300 basis points year-over-year, the team is continuing to look for further opportunities to improve. Products business delivered $6.9 million in revenues, similar to same quarter a year ago. GAAP gross margin for our products business was 41% in first quarter of 2023, as compared to 35% in same quarter last year. Non-GAAP products gross margin was 52% in the first quarter of 2023, as compared to 44% in same quarter last year, an improvement of 800 basis points. As discussed in our previous calls, improving gross margin for products business stays a core focus area for the company, and we are making good progress at it. Turning to operating expenses and adjusted EBITDA. Non-GAAP operating expenses for the first quarter was $61.7 million, up about $1 million sequentially from Q4 2022. The increase in our GAAP operating expenses was mostly driven by increased legal expenses. For the first quarter of 2023, we recorded negative adjusted EBITDA of $6.4 million compared to negative adjusted EBITDA of $3.7 million in the previous quarter. If we were to consider unrecognized revenues associated with March impacted tests, we would have recorded a positive adjusted EBITDA of $2.5 million. Turning to cash. We continue to maintain a strong financial profile as emphasized by our robust balance sheet and cash balance of $286 million and no debt. We generated positive cash from operating activities for the second quarter in a row. Importantly, the first quarter is usually a seasonally weak quarter for cash usage as we pay annual bonus to our employees. Our focus on cash collections and working capital management contributed to achieving positive cash from operating activities. I would also like to note that we earned $2.7 million in interest income for the first quarter of 2023. To the second takeaway, lead indicators to assess the financial impact of the billing article. Reg has already provided color on how the billing article revisions have impacted our strategy and on the operational challenges to implement the changes required for hundreds of transplant centers and the ecosystem around it. All of our efforts have now been shifted to operationally implementing the changes required by the billing article. Though we are seeing adoption of revised processes, this is a Herculean effort that could not occur by the effective date of 3/31, especially for our kidney services. Given the significant change, complexity and related uncertainty, it is difficult to assess the financial impact of the billing article yet. Let me share with you lead indicators. Number one, education. The first step in implementing the billing article is the education of the transplant centers, providers and support teams. I'm pleased to inform that we have educated approximately 80% of all centers. It covers 90% + of our volumes for kidney services, and the education is ongoing. This sets the path for adoption of the new requirements. Also, it is important to note that after the first four weeks, post the effective date of billing article, we are experiencing lower testing volumes as centers and clinicians are still learning, transitioning to the new processes and need to update the IT system. Number two, adoption. At the end of April, approximately 50% of our incoming test requisitions were on newly implemented forms that included required information to comply with the billing article. This is trending at approximately 60% in May so far. I think it speaks highly of our teams that have been working nonstop to implement new processes and system updates. We expect to continue to see an increase in the adoption to approximately 80% - 85% by the fourth quarter of 2023. Number three, claim submission. For AlloSure Kidney test starting March 31, 2023, we have not been billing any test to Medicare unless they come with the requisite information on the new test requisition forms. We are going back to the prescribing transplant centers to collect that information. I would like to note that this will add significant operational burden on CareDx. As shared earlier, there's still a large percentage of incoming tests that are coming on old forms or are incomplete. If a test is pending collection of requisite information, it will impact revenue recognition. For our AlloMap Heart and AlloSure Heart test, we are continuing to follow our Medicare reimbursement submission process. In addition, we plan to inform Noridian that until Noridian adopts the revised billing article, CareDx will continue to submit AlloSure Heart tests for reimbursement only when used in conjunction with AlloMap Heart, including the test where we have not obtained additional information as required by the billing article. However, post June 30th, 2023, we plan to submit to Medicare only those tests that meet the billing article requirement. Please refer to our 10-Q for further discussion on billing article and its impact and associated risks. Turning to our third takeaway on our plans to mitigate the impact of the billing article. The billing article will impact testing services business based on the early trends of lead indicators. Therefore, we have started to align our cost structure. We expect these actions will help drive approximately $40 million-$50 million in annualized savings. As we increase our understanding of the financial impact, we will adjust our actions to minimize cash burn. It is important to note that during the transition period of operational implementation, we will require more resources to deal with significant additional administrative burden in certain areas. Here is a quick summary of various actions that we are taking. We are restructuring our workforce and our goal is to reduce approximately 12% of our headcount as compared to what we had in the beginning of the year. Two. We are reviewing our test volumes, specifically in areas where the tests are not covered and are not reimbursed even after appeal. Three. Prioritization of clinical studies and R&D spend to stay focused on the most important areas that would help us improve coverage and drive revenues. Number four, review of legal spend and reduction of discretionary spend to the extent possible. In addition to looking to reduce expenses, as Reg mentioned, we will continue to focus on our three C's key strategic areas to drive upsides. Turning to guidance. We're withdrawing our 23 revenue guidance at this time, given a multitude of unknown variables related to the billing article as we have discussed during this call, many of which are outside our control. Specifically, number one, interpretation of MolDX policy in the context of two billing article revisions since March second. Number two, adoption of the billing article by Noridian and updation of IT systems by centers to incorporate new test forms. Number three, impact of transition on testing services volume during the period of education and implementation. Number four, rate of adoption of new forms, percent completion of the requisite information, and success in collecting missing information from the TRFs. We will revisit this in our earnings call for second quarter of 2023 once we have gained a better understanding of the evolving landscape. In summary, we had a good first quarter. It could have been even better had we not hit the challenges due to billing article revisions. All efforts now are on operational implementation of the requirements of billing article revisions to increase the rate of adoption as much as possible. We are taking necessary actions to adjust our cost structure and do not anticipate a need to raise cash in near future. We will continue to build on our key strategies by enhancing our efforts to improve coverage and collections areas that we can influence. With that, I'll hand over the call to Reg. Thanks, Abhishek. I think, let's have Greg, if you can work with the operator to open lines in Q&A. Thank you. Certainly. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, you can press the one followed by the three. Our first question is from the line of Matt Sykes from Goldman Sachs. Please proceed with your question. Hi, good afternoon. Thanks for taking my questions. Maybe the first one for you. I appreciate the color on, you know, the percentage of forms and Abhishek, I know you said that volumes, testing volumes were lower as you've seen recently, but maybe just help us frame the impact and maybe provide a little more granularity on sort of what testing volumes have trended to date and what it looked like in April and the first start of May, just so we can kind of help frame sort of the revenue picture. Yeah, Matt, thanks for the question. I'll make some introductory remarks, and I'll hand over to Abhishek as part of that. I think, you know, we have some early read on the, you know, the market volume and clearly there's a bit of, you know, interim flux that we've gone through a few of the complexities as part of that process. For example, you know, some of the centers with EMRs, we actually need them to actually update the forms on their side, which has created a bit of an issue. There is a bit of this transition dynamics, but I'll hand over to Abhishek, go into specifics. No, thanks, Reg. As we were saying, Matt, that this is a complex change and there are still a lot of education that the clinicians and the centers need to go through and transition the new processes. Of course, as we said that in the first quarter, our testing services volume were pretty solid. After we have implemented these new Test Requisition Forms, it has started to basically, due to the change management of this whole exercise, it started to kind of drop a little bit from that standpoint. It's in the range of high teens as of right now, based on the early indications like the first three or four weeks, and we'll basically see as to how this shapes up in the next few weeks. Got it. Thanks for that color. Maybe just in terms of like one of the debates post this has been sort of the frequency of tests. Suppose you can change the forms and re-educate the centers. Do you foresee a drop in frequency for some of your tests in terms of that waterfall that you've traditionally had for your testing services? Yeah. I'll add some color and then I'll hand Abhishek talk as well. I mean, what we've found, Matt, during this process, the key is really getting operationally ready. I mean, I think centers with focus less on, you know, is this trying to, you know, full course surveillance. The question is, when will centers be ready and operationally ready? That's the most important thing. I think with, you know, 550+ centers we've had to reach out and with many of these centers that, you know, weren't ready. That's the key bottleneck. It's this operational implementation. We've had thousands of interactions. If these aren't up, then that sort of discussion goes away. I think what we've seen is, you know, this trend, of how do we get the centers up and running and then how do we get these forms in the right format. I think that's why the team under Alex has made significant progress going from this 50% in at the end of April and now in the start of, you know, May, we're starting seeing that about the 60% range. I'll let Abhishek add some more color. Yeah. I think you have covered it pretty well, Reg. We are still trying to assess, and I don't know, Matt, if you know that, there was another billing article that came late last week, and we're still trying to interpret everything that is out there, and we will basically make that assessment. Yeah. Got it. There are some positives out of that, you know, that new billing article that have come through as well, Matt, which, you know, removes some of the earlier, sort of issues that were raised such as this, what was known as this 14-day rule and also the requirement for a center to have the, you know, center protocol, for example, to shift in more the physician side. Robert will cover that more in detail as questions come up, but there have been some changes that I think will address that as well. Got it. If I can squeeze one more in, Abhishek, on the $40 million-$50 million annualized cost savings, in terms of how we should think about that phasing in, over the course of this year, could you maybe help with a little additional color on that? Yeah, sure. Absolutely. We have already started to take the actions and then, my sense is that, you will start to see in Q3 a proportionate impact to start to happen, right? Not necessarily the full 1/4 of that $40 million-$50 million, but I would say still a significant portion of that you will start to see in Q3 and then you'll start to build from there. Q4 and Q1 you'll probably start to see 1/4 of that impact, and the benefits start to show up. Great. Thank you very much. Our next question comes from the line of Andrew Cooper with Raymond James. Please go ahead. Hey, everybody. Thanks for the question. Maybe first, you know, you gave a lot of those comments on kind of the rate of completed forms, but I just wanna understand when you say completed forms, are those completed in a way that to your knowledge does meet the requirements for reimbursement or just completing the information that then CMS or MolDX or Noridian would need to contemplate to decide whether or not to actually reimburse for that test? Meaning in the indication where you need to be replacing a biopsy, is it just that there's commentary to support or is it you think this is enough to actually justify the payment? Yeah, Andrew. I'll make a few comments and then I'll let Robert make additional comments there. The way we have rolled out the new test requisition forms, we basically specifically ask the information that ensures that whether they are meeting the requirements of the new billing articles. Yes, if they are complete, that would mean that they are billable. What the numbers that we have been sharing in our call, I would say that 90% plus of those forms, they are basically billable to Medicare. Okay. That's helpful. You know, I think when we initially spoke kinda after the first of the billing articles came out, there was some conversation around some incremental data, some things you could do on multimodality, you know, sooner versus later. I think potentially the comment was, you know, within sort of a month of that early March start. Can you give us an update for where you are in terms of driving, you know, more confidence in multimodality as opposed to single modality as the path forward? Yeah. I mean, I think multimodality, I'll make some comments and hand over to Robert, but this is an area where, you know, we've obviously seen a lot of, you know, clinical utility and, you know, demand from the marketplace given to the complementary technologies that will come. I think we've had very, you know, good active dialogue with MolDX as part of that. Robert. You know, we certainly believe there's sufficient evidence to demonstrate the validity and the utility of HeartCare, our primary multimodality that we've been discussing. There's even several independent publications on that utility. We discussed our approach with MolDx, and they requested we submit some data. We're preparing a detailed analysis that we will submit very shortly to them for consideration. Great. That is, that's good to know. You know, lastly, I know you made sure to point out not anticipating a need for cash. We did see during the call a shelf get filed. Just a little bit of a thought, is that just corporate housekeeping? Kind of any comments in regards to those two things as they fit together? Sure. I'll take this one, Andrew. I just want to highlight, that we as a company have been extremely prudent, and you would be able to see this from our performance in the last few quarters that we have been very, focused on managing our cash. We ended the quarter at $286 million in Q1 when, last year we used almost like $20 million. This year we were positive on the operating cash flow generation. That basically shows the importance of cash, for us as a management team. This is going to stay the focus that as we assess and as we basically build a better understanding of the financial impact here, we will continue to make sure that we are doing the right things so that we don't have to raise cash. Yeah, it's just part of standard housekeeping. As we mentioned and prepared, Mark, there's no plan to do any raising. Thank you. Great. I'll stop there. Thanks, guys. Our next question is from the line of Brandon Couillard from Jefferies. Please proceed with your question. Hey, thanks. Good afternoon. Abhishek, on the $8 million-$9 million delayed March orders that you expect to submit in 2Q, isn't there a chunk of initial orders in April and May that seem they also getting deferred? How did you think about, you know, recouping that, but also, you know, a portion of it, which you're not gonna be able to recognize again in 2Q as well? Can you help us on that? It was very difficult to hear you, Brandon. I'm sorry. If I were to rephrase, you're talking about the $8.9 million of tests that we did not submit in Q1 that we plan to submit in Q2. Is the question around the revenue recognition for those tests? We cannot hear you, Brandon. Yeah, that's right. It's I'm talking about the $8 million-$9 million that you didn't submit in March, but you expect to recognize in 2Q. Isn't there another chunk in, you know, in 2Q that would also get pushed out? How did you think about the magnitude, I guess, of those two numbers? I think that's the part of the complexity, right, Brandon, that we're trying to get better handle on. For example, the adoption of the new or the new test acquisitions that we are seeing, where the adoption has been about 50% and it has improved to 60%, there's still the remaining 30%-40% that will come in Q2, where we will have to go back and supplement the information so that that meets the requirement of the new billing article. To your point, till the time we have been able to collect that information on those set of forms, we will not be able to recognize the revenue. You are right that there will be more like a lag now on some of those tests that we were able to recognize revenue very easily in the past. Brandon, part of that is why also, you know, Abhishek factored that into the, you know, considering guidance. I would break this into, you know, the time point of March 31st, the effective date. I think, you know, the tests from that pre-effective date were submitted. I think what you're hearing from us is that given the changes in the billing article requirement, different forms, that if we had them, you know, complete on the new forms and in the right, you know, format, then those will be submitted. I think we've communicated, you know, the trending at the 50% mark in May, now trending 60% mark. We continue that to increase. For those other tests, we will go back to the centers and request that information. That's the lag period that you're talking about. We'll have a better feel on that adoption rate, which is why that's so critical. Okay, that's helpful. Then the $40 million - $50 million of targeted cost savings, can you bucket that for us between the three OpEx lines, R&D, SG&A, and sales and marketing? Is that net of additional remediation costs that you're having to spend, all the education efforts and hand-holding with customers? I would say that, yeah, instead of providing you the color of breakdown the COGS and the OpEx, I think this is kind of so recent that we are still. I'd probably just tell you that it's primarily related to the headcount law of actions that we have already taken. Those headcounts are basically cutting across, I would say, different P&L lines on the R&D, on S&M, and the G&A. On the COGS side, you will not see a lot of headcount reduction as of right now because we are still processing the tests that we are receiving. As we basically build more understanding of the volumes and everything, we'll probably see. At the same time, any actions that we were supposed to be taking on the headcount, we've already taken those actions. Then, of course, some of the other pieces that I highlighted that we are looking into the discretion spend, the legal spend, and we are focusing on the rightful studies on the clinical trials and everything. There are a lot of pieces there. I would say that we are looking across all functions. It's a fairly sizable, from the magnitude standpoint. Okay, last one. You do have a buyback authorization out there. Is that, you know, currently being contemplated, you know, given the sell-off in the stock? Number 2, what are the prerequisites exactly to, you know, feeling comfortable enough to reestablish guidance? Just help us understand, you know, what you need to see to get clarity on before feeling comfortable putting that back out there. Thanks. Sure. On the share buyback, we put a pause on the buyback after the billing article came. That's the first answer, Brandon. Once we get more understanding, we will make a decision on that one. Yeah. I think also on the guidance, I'll make some comments, and I'll also let, you know, Abhishek, you know, talk more. I think we've talked about, you know, we're 4 weeks in, so we have some lead indicators now. I think the other things that Abhishek was, you know, going through, I think the key ones is understanding that adoption, for example, and that uptake, which, you know, we're trending at the moment. I think the other thing is understanding when, for example, Noridian adopts the first or second of the billing articles they're having is at this time point. I think also discussion with MolDx. You know, they've done two revisions within eight weeks as well during this time. I think one of the other key variables is that out of our control is centers. I think, you know, for example, we've gone back to some of the, you know, centers, and these are large institutions, and they're fully supportive of what we do as a company and have gone back to their IT systems. That takes a couple weeks, and then we have the meeting with the IT systems. That takes a couple weeks. In other words, with best practice, you have centers wanting to work with us. As you're aware, to schedule these IT sort of meetings sometimes in the normal scheme of things takes up to one year. I do think there are these variables which I think we'll have more insight into, and I think we communicate in prepared remarks. We'll look at that, at the next quarter. I do think we'll have certainly more of these lead in-indicators and sort of more understanding of some of these uncertain variables. Abhishek, anything else to add? You got it. Our next question is from the line of Mark Massaro with BTIG. Please proceed. Hey, guys. Thanks for taking the questions. Sorry to hear the headaches from this new policy. You know, my first question, you know, I understand, of course, that you suspended the 2023 revenue guidance. I just wanted to make sure that it would be logical that you're also suspending your adjusted EBITDA positivity goal in the first half of 2023? That's true, Mark. We never guided the adjusted EBITDA. That was basically our goal. The guidance was around the revenues, and that's the reason we were more explicit in calling that one out. Of course, given all the impacts and everything, the adjusted EBITDA goal for the second quarter is not there anymore. One thing, Mark, I think it's an excellent question because I think in our prepared marks, we really wanted to focus on the, at least mention the operational execution and the plan that we had in 2022 and how we continued that into 2021. I mean, I think what we demonstrated once you included the impact in March test, we had the adjusted EBITDA of $2.5 million, which happened during what we had sort of projected and why we had this operational focus. We thought part of that commentary might have been lost if we didn't mention it up front. I think it's a good reminder of, you know, what we've executed as an organization, particularly over the last six, nine months to get there and focusing on those three Cs, which remain unabated and a core focus for us. yes, I think, you know, Abhishek has answered where we are with that position towards the billing article. Yeah. Okay, great. Medicare is not your only payer, so, you know, I'm curious if you've had conversations with any commercial health plans, whether or not they have any intent of following the new Medicare policy. Yeah, Mark, that's excellent. We talked about the 3 Cs, and I think what we've demonstrated with firstly, the 1 C with collections is that we can build an excellent plan and execute on it. I think that's where you're seeing these collections exceeding the revenues and adding to the cash each quarter. We're really excited by what we've been able to do there. On the prepared remarks, you probably heard about coverage, and I think this is an area where we. You're right. There's significant opportunity in other areas, including where we've covered ISHLT guidelines, getting all the coverage for on the allogeneic. I think also as we look at some of the areas both, we have, you know, active areas of both on the kidney and the heart side that we're working on to share some news with in the next few months, which I think will be positive for the organization. I do think this is the next stage of an area of significant opportunity for us. I do think there are multiple areas working with payers where we can talk about all the great, you know, work that we've developed, the science supporting, our products, and I think this is well underway. We, we feel good about what we'll be able to share in the next few months on the commercial side of things. It all starts with a plan, Mark, and I think, you know, we did this deliberately last year with the 3 Cs. We're really executing the collection side. You're seeing that flow through. I think now as we work with our commercial coverage team, we're starting to see some really, you know, exciting, you know, good discussions, which we'll share more in the next few months. Okay. You guys have been committed to data development, and one of the large studies you're working on is the SHORE study. It would seem that if you could publish perhaps an interim readout of that, I think the goal is to enroll, I think, 3,000 patients. I think if you were to put out an interim readout that might help satisfy, you know, perhaps CMS. Can you give us a sense for, one, whether or not you think that's true? Two, what are your plans to potentially show interim data? Like, when do you think we might be able to see that? Hi, this is Robert. So we're actively working on that. As you know, when you start one of these clinical trials, you start enrollment, but it takes, you know, time to get the full enrollment started, and then you have to follow each of those patients for the assigned amount of time. In the middle of SHORE, COVID happened, enrollment took longer than we expected. That, you know, kind of explains where we are today. However, you know, we do have the same goal that you've mentioned of a readout as soon as we can put one together. We're actively in analysis of the data we have and working with our clinical operations group to ensure we've got the quality data that we're working with to produce a publication. Okay. Thanks. Maybe last one for me. You know, I think this has been asked, but maybe I'll try again. You guys talked about the 50% in April, now 60% on the forms. I think what we're trying to extrapolate is, you know, does that suggest the sort of, you know, an impact of up to 40% of volumes going forward? You know, I think related to that, I think another transplant player in the space talked about, I think, headwinds of somewhere around 10%-15%. I guess I'm trying to marry the 10%-15% I heard yesterday to trying to interpret the 60% metric that you gave tonight. Let me take a shot at it, Mark. The adoption rate that we're providing of the new TRS, that 50%, and it has gone up to 60% in May. For the remaining 30%-40%, we will still go back to those transplant centers, and we will require or request for that information. There's an additional administrative burden there, but that doesn't mean that you cannot recognize the revenue, so it's not lost. I think I just want to make sure that that's pretty clear. The other piece that you probably are looking for, I don't know, what is that 10%-15%, but maybe the other piece that we discussed in the call was around this initial impact on the volumes, the early indicators that we have seen that I basically discussed earlier. That's the only other piece that on the volumes, the early indicators, some of the headwinds that we are seeing. Yeah, Mark, I think just to be consistent, I think the initial disruption volume trends, I think, were fairly consistent with what others have said actually. If I looked at the range, I think Abhishek had shared, it was the teams, right? I think that's consistent with what we've heard from others. I think what we're sharing here is that we, as a company, we take what we do seriously. I think at the same time what we're doing is the forms have to be updated. We know that systems have to be updated, and we have a responsibility to do that, which is what we're doing. I think if certain centers who are on EMRs and we're dependent on them, we can't say, "Let's submit, you know, old forms just because they've been sent over," because, we need to go back and say, "Can you please clarify?" I just wanna make that important distinction, Mark, because as a company, that's important for us to follow that process, and that's what has been requested. The good thing about that is there's time to go back to those centers, as part of what's allowed in this process. We just want to make clear that it doesn't mean it's lost volume. It means that what you do is you wanna make sure what you submit is what's being required. I don't know if others certainly have, you know, EMRs where they can certainly. You know, if they haven't changed them, then they need to be updated at those centers. Okay. Yeah, that makes sense. Thank you for the clarification. Absolutely. Thank you. Our next question is from the line of Alex Nowak with Craig-Hallum Capital. Please go ahead. Okay, great. Good afternoon, everyone. Maybe a similar question along the same vein. The, the $8.9 million of revenue that was withheld from reimbursement here in Q1, is that basically an absolute worst-case scenario of what the impact to revenue and volume could be from March seventh to the end of Q1? Basically, these are the tests for our AlloSure Kidney Medicare, and these are the all the tests, every single test, because we did not bill anything during that period. Yes, you are right. It includes for cause and for surveillance, I guess I'm trying to understand. Is it only surveillance? No, it includes every single Medicare test. Okay. Understood. And then I just wanna be clear. On one hand, you're making these big cost cuts. You're laying off 12% of the workforce at CareDx. On the other hand, you're also saying you're gonna challenge Noridian directly. You're saying that the billing articles aren't consistent with the LCDs. You opened up with that Noridian still needs to pay for these tests. You know, is that challenge to Noridian a bit of a Hail Mary out there and potentially pushing them to maybe not implement the MolDX policy? This is Robert. I think, you know, what we said was that, you know, we believe these are changes. I don't know that where there's a specific challenge to Noridian there. We will, of course, follow them as the... You know, we've worked with MolDx to make sure that we understand and what we need to follow. We do believe that these are changes, and we'll work to address that as you've seen, you know, in the professional societies that have addressed them as well. Yeah, Alex. I think in our preparing remarks, we had numerous discussions with MolDx and planned out further discussions with them. We also reached out to CMS for the matter and plan to reach out to Noridian. I think this is dialogue. Yeah. Okay. And, you know, from the CAC meetings that were in November and also from the coverage policy that came out, it looked like it was pretty clear that Medicare wanted more utility data on the surveillance population. I think they even said that, and one of the KOLs said that during the CAC meetings. So beyond new forms You had the KOAR study, which did have a big surveillance aspect. When should we expect to see more data from KOAR get published in a peer-review journal? Other than forms, what other data could you show to generate why using cell-free DNA, why using gene expression to monitor these patients is ultimately better for patient care in both the for-cause and the surveillance setting? Yeah, Alex, I'll let Robert, you know, add some more contribute. I just want to go back to what we shared before. I think if ourselves and others have seen this, you know, teams, sort of impact, what we're sharing is that, you know, with the remaining, those percentages is what we're working with is getting that update. I think that's the key. I think, you know, what we've seen is the getting the right forms is the focus, and the faster we do that, the better. I do think that has been the focus of how do we, you know, ensure that as we've, as with others, have had this team impact, then what do we do with all the forms that are coming out? It's making sure they're compliant and what we see per the billing article request. Robert, I don't know if you want to add more in terms of, you know, KOAR data, plus also, some of the areas that Alex asked about. Sure. We've got multiple approaches to this aspect of evidence generation in surveillance. One of those, of course, is KOAR, as you mentioned. It is a more mature study. It's been around longer than SHORE and faces all of the same requirements that I mentioned for SHORE. But the additional requirement that as if you're looking for to have a measure of surveillance, you need to have the full time course for all of the patients. As that nears completion this year, then we'll start working on those and analysis and publications. We don't have a timeline yet. Okay, understood. Just a last question, just any status update of the DOJ investigation, the state inquiries, and were any of these inquiries related to the reimbursement that MolDX ultimately changed? I saw there's a lawsuit you filed against your liability insurance provider. Just what was that for? Yeah, there isn't any material update on the DOJ and the SEC side. I didn't catch the second part of your question, if there was any. Yeah, I mentioned it was in the 10-Q. It mentioned, CareDx filed a lawsuit against your liability insurance provider. Yeah. Maybe that is basically that we might have initiated something with our insurance provider to recover some of the expenses that we have incurred on some of these legal cases. Got it. Okay. All right. Thanks for the update. Our next question is from the line of Mason Carrico from Stephens. Please go ahead. Hey, guys. Maybe one just on how you're thinking about the market overall, sizing it up at this point, assuming, you know, this policy plays out as it's written, I guess. How do you think about, you know, the overall testing opportunity for AlloSure Kidney? Thinking about the number of new kidney transplants each year, as well as the number of patients living with a kidney who would be, you know, more likely, you know, surveilled. I guess just how are you thinking about the testing opportunity now? It's a really good question about the market dynamics. I think one thing that hasn't been covered as much, I think we've talked about the impact on the market and, you know, we obviously continue to beat the market growth as a company. As you know, particularly at ISHLT, for example, and in other meetings, that there's a real excitement about what some of these, you know, organ transport, organ perfusion companies can do, plus also with some of the other latest approaches to expand the organ base, such as using NRP. As we look at this, and we've always had this as part of our, you know, longer term look at the transplant market, is that it has potential to double the number of transplants in space. It's a really good point because I do think, you know, transplant is a fairly unique space, and I think it's one which still has that, you know, ability to grow. I think we talked a bit about the kidney side with living donors being sort of the most impacted during that COVID period and hadn't reached its sort of, you know, previous peak point post-COVID. I do think it's a, you know, as you look at the space overall, there are multiple, you know, players entering to say, how can we sort of increase the number of, you know, organs or increase the viability organs, or how do we expand, you know, alternative types of organs for this space. It remains to be active because at the end of the day, Mason, what you have is basically, you know, a lot of, you know, patients who don't have enough organs available, and so that unmet need remains. You have, you know, essentially, you know, a large number of patients who get an organ, but this organ doesn't last, you know, a lifetime. I think, you know, you see, you see the importance, for example, those New York Times article by one of the, unfortunately, one of the patients who shared her experience with this, where, you know, she did pristine management of her organ, but where ultimately, you know, she was dealt with some of the secondary issues of long-term immunosuppression with malignancy. I do think, you know, it's a really good point of, you know, transplants can double, but also at the same time that, you know, we continue to play a role in this space because I think, you know, this space still has a lot of areas to grow, particularly if you think of the impact of immunosuppression and other areas that we can address. Really, really nice points, Mason Carrico. Yeah, thanks for that. Maybe to expand there a little bit, in terms of the change in testing frequency, if surveillance patients, you know, if you can only use these non-invasive tests when a surveillance biopsy be used, or, you know, for a for-cause biopsy, that's the only time these tests could potentially be reimbursed. I know we're still figuring that out. Do you feel like AlloSure's TAM has shrunk? Do you still feel confident that it's, you know, a large opportunity based on this new billing policy? I guess just any additional color there. Yeah. I think what we've seen along with others is this team sort of impact in the first four weeks, that's a lead indicator that we both have. I think, you know, the goal now is of those, of the tests that we receive, is how do you make sure that they can be filled in the right forms? I think, you know, us and others have seen sort of a similar, impact, which is around the teens, right? The high teens is what was described. I think, you know, for us, you know, transplant at the end of the day is, you know, a set of patients who, you know, we think should be treated, in a way that gives them every opportunity to have that organ for life. I think in many ways, they're a very unique group who actually have to face with lifelong expression. They're a group who, you know that the organs, you know, historically have failed. For us, it's important to support that patient group. At the end of the day, that's our mission as an organization to do that, and I think that's really important. I think it's still early. It's a really good question. I think one of the things is we've highlighted, it's early. We have, you know, 4 weeks of data, and now we have 1 week of May to talk about. I think the good thing is, you know, more and more information will come through during this time as part of that process. The goal is to operationally focus. We've demonstrated during the course of 2022 that we were able to operationally focus, which is why we sort of, you know, wanted to get out front the Q1 results and also how we were able to deliver on that. Now we have a new plan, which is Alex and his team, how do they ensure that the centers are operationally updated, the key gating step obviously being systems. We can't force centers to update their EMRs, but there'll be a subset of centers which will not have those EMRs up to date, right, and will take time. I think that's really important for us to focus on as well. Got it. Thanks for that, Reg. Last one for me here, and I apologize if you guys have answered this, but in terms of the centers that have integrated their systems and are up and running, so to speak, have you seen a difference or a decrease in orders from those centers in general? Are they still using AlloSure Kidney at the same frequency as they previously were, or has that changed at all? Are there any, you know, early indicators about how that's shaking out? I think everything's, you know, center by center. I think what we've seen is similar to others about this, you know, team's impact. I think at a macro level, that's probably what we've observed, what others have observed as well. I don't know if there's any additional commentary the team has to that, but I think that covers what we've seen and others have seen at the moment across the business. Our next question is from the line of Yi Chen with H.C. Wainwright. Please go ahead. This is Chase on behalf of Yi Chen. I'm sorry if I missed this during your prepared remarks, but could you provide color on the total number of centers you anticipate to educate every quarter and, you know, subsequently hope to see implementation of these new processes? Yeah. What we shared is that the complete universe of heart, kidney, and looking at not just centers, but also, you know, practice or community practice as well. I think we shared there were more than 550 in that total universe. The team has focused on where 90% of the volume is and that they've had 80% of those centers now currently educated as part of that process. Okay, great. Thank you. The last one on future catalysts. I know you made a brief remark about it, but and also you've addressed a few in your question and answer session, but are there any other readouts or publications that we need to keep an eye out for in this year? Yeah. I think a lot of questions and I'll let Robert add as well. I think a lot of the good questions came out in terms of, you know, when do we have some additional updates on areas which HeartCare is being prepared based on MolDx feedback for resubmission. I think also, you know, some of the other analysts have talked about on the, you know, kidney side and on the heart side, some of the studies we're doing, so they're born prepared. I think when we talk about catalyst flow, we were specifically talking about some of the new introductions. There would be things such as, we're in active discussions on AlloSure Lung, for example. I think another area was, you know, UroMap, which I think is a new modality, which provides, you know, a really interesting approach to the portfolio, just given there are no, you know, commercially available, you know, urine tests out there, and this comes from Cornell, by the world-leading expert there and also, you know, multiple New England Journal of Medicine publications. I do think this, you know, space is welcome to additional types of what we call catalyst offerings, which I think the idea is bringing, you know, new innovation to the space. Yeah, there are other areas that we would look at, particularly for UroMap for this year. Robert, anything else you want to add? I think, specifically about publications, and I think, I've mentioned that, you know, those are things that we work on, as soon as we can from the output from the KOAR study, and an interim readout on the SHORE study. Others are, you know, always in the works, but it's difficult to predict timing of publications that involve, you know, peer review, etc. Hard to comment on timing of those. As Reg mentioned, you know, we still are pursuing all of our catalysts. They're all things that are of high impact to patient care, and we want to make sure that we make those available for patient care as soon as we can. Thank you. There are no further questions in the queue at this time. I will now turn the call back over for closing remarks. No, thanks very much. I wanna thank the analysts and the investors listening to this call, and if there are any, you know, different folks who have patients, for example, as well. I think, you know, we know that it's been, you know, a tough time. We also know that, you know, what we do is a very unique space and one where I think there's obviously been some changes. I think for us, you know, we had a specific plan in 2022, which, you know, I think we've continued to deliver on Q1. I think moving forward, we have an updated plan which the team's committed to executing on now as well and addressing some of the newer challenges that come through. you know, again, we thank you for your support, and we thank you for your commitment to transplant patients. Thank you again. That does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your line.