All right. Welcome, everybody. Good afternoon. My name is Matt Sykes, a Life Science Tools and Diagnostics Analyst at Goldman Sachs. I have the pleasure of joining, of welcoming CareDx onto the stage. We've got John Hanna, the President and CEO, and Abhishek Jain, CFO. John, Abhishek, thank you very much. Thanks for having us. Thanks. Maybe before I start out, actually, before my first question, John, you're new to CareDx. We'd love to get sort of, one, a little bit of your background, and two, the decision to come to CareDx. What factored into that? Absolutely. So my background, I think, is unique in this space. I spent the first 10 years of my career in insurance, really understanding how payers make policy decisions to pay for and cover products like CareDx's products. Then I spent the next 10 years at Veracyte. I was employee number 30-ish there, working for the CEO, Bonnie Anderson, for 10 years, building up that business, ultimately as Chief Commercial Officer in the oncology market space. I spent the last three years in the Life Sciences Tools industry, building high-throughput NGS sequencers, and sold my last company to PacBio last August. Then had the very fortunate opportunity to join CareDx, a company that I have admired from afar for many, many years. I think CareDx is unique in its mission and focus on transplantation and supporting that community and patients, given the huge unmet clinical needs there in trying to detect allograft rejection and improving the throughput of organ transplantation in the market space. And then, given this market that we have, which is really captive in the transplant centers, that enables us to get leverage in our sales channel to drive profitable growth in the market. And that was one of the key things that attracted me to the business. That and the breadth of offerings, both in testing, products, and software, that I think is unique to CareDx in this segment. Got it. Thank you very much for that. And so maybe just on the back of what were very strong Q1 results, now that we're a few months removed from that, just maybe talk about through some of the high-level takeaways you would like investors to have, some of the feedback from investor conversations, and some of the things you want to make sure you get across from that Q1. Yeah. The key takeaway is we've reset the business. So in Q2 of last year, we hit a new baseline, and we've grown sequentially quarter-over-quarter in testing volume each of the last three quarters. And that is being driven by greater comfort with the documentation required to get paid for the testing and new protocols around the current coverage policy, as well as the overwhelming amount of evidence that's come out supporting our testing both in heart and kidney. And so we've had a number of presentations throughout the past year or so on HeartCare, the use of both AlloMap Heart and AlloSure Heart, and how dual positive tests have a higher likelihood of rejection than dual negative, and really changing physician behavior around biopsies. And then in the kidney space, demonstration that AlloSure Kidney clearly detects rejection ahead of histology on biopsy, which is critical to early detection of that in treatment through immunosuppression medication. And then on the finance side, maybe Abhishek can talk a little bit about the takeaways there. Yeah. On the financial side, of course, Matt, as I've called out, that we have reset the company, and we were fairly close on reaching the adjusted profitability on the EBITDA side. I think we were less than $2 million. So we feel very good on the financial structure of the company, as we are able to kind of grow the top line and how we're able to kind of then use the leverage to drop that incremental revenue to the bottom line to basically get to our goal to return to profitability. I think from that standpoint, we feel very, very good based on the results that we are seeing in Q1 and the visibility that we have going forward. Got it. Maybe if we just kind of stay high level for a minute, how are you seeing trends in the overall transplant market in terms of volume, staffing, waitlist dynamics, other kind of factors that could be impacting market growth? Yeah. The trends are positive in the transplant market. We're seeing low double-digit growth in heart and then high single-digit growth in kidney in particular. And the waitlist is significant, right? There There was almost 100,000 patients nationally in the U.S. alone on the waitlist for a transplant. The bulk of those are in the kidney space. And we see CMS now has issued the IOTA Model program to try to incentivize centers to utilize more of the available organs to increase the rate of kidney transplantation specifically. Got it. And could you talk to sort of what longer-term growth you're anticipating within the testing services business? I mean, we've been through a period of volatility, so a lot of it was out of your control. Some was market dynamics, but maybe just how you're thinking about long-term growth for the company. Yeah. The company has a number of levers for growth. One is the actual volume of testing. So as we go forward, we're seeing in heart, for example, with some of the SHORE data that's been published, higher utilization of the testing in the first year and second year post-transplantation. In kidney, we're seeing greater comfort around the protocols to test that have been laid out. So we're seeing increasing sequential quarter-over-quarter growth. And then with the tailwind of the increase in transplantation in the market overall, we anticipate that in the future, we should be getting this business to double-digit growth. We haven't provided that guidance yet, but we're looking toward the second half of the year to provide longer-term guidance for the company. Got it. To the extent you can comment on it, just sort of giving investors an idea of timeline, et cetera, with the patent litigation that you're involved with with a peer, could you just talk about what investors should expect from a timeline perspective on that? Yeah. As we've shared on this, the timeline is that we're actively appealing the jury verdict and that that appeal is actively being briefed with the court. And then the judge will take his time to review those briefs and make a determination as to the validity of the patents that were asserted and whether or not the determination of the jury was one that he chooses to uphold. Ultimately, this is an open-ended timeline, right? The judge is not restricted by any specific time. But in general, we see these things settled within 12-18 months. Got it. Okay. And Abhishek, maybe for you, talking about sort of the key drivers to potential upside to the 2024 gross margin guide, you guys have historically had really high gross margins as a business. There was obviously some fluctuations when we had the billing article last year. You've reset the business. It doesn't seem like there's been any structural changes in the profitability of the business. So maybe talk about what some of the levers are to the gross margin that you have today and the potential expansion and any upside to that guidance for this year. Yeah, absolutely. To your point, our gross margins have been extremely healthy. The testing services business have always been mid-70s, close to that. After the billing article, we kind of dropped slightly below or closer to the 70%. From the lever standpoint, the gross margin, I think as we start to see the volume come back in and then the top line were to grow, that becomes the biggest lever from the testing services gross margin perspective, right? To John's point that, okay, we are looking at the volume growth. That's the first piece. The second piece is how we are able to drive the coverage with some of the recent studies that we are seeing, because if we are able to improve the coverage, and the third component of that is the collections, because the coverage and collection can drive your gross margins very high, very quickly, as compared to the volume, which will basically give you the leverage to improve the gross margin. So still very bullish on taking the gross margin for the testing services business in early-to-mid-70s. I think that's the goal for us in the short period of time. As we start to see more coverage, then of course you can grow further from there because half of our tests are not being paid as of right now. When we're to talk about the other businesses, for example, the product side, I think the lever there is basically still the expense side of the house in addition to the volume, because I've called out that we are looking into the site consolidation where we are moving the manufacturing, which is much closer to the customer. That will provide us the opportunity to improve our gross margins on the product business. Got it. Got it. Since you brought it up, I do want to address the cash collections. You guys have done an extraordinary job of making sure that you're achieving some of that. Could you maybe talk about some of the runway that's left there, or do you feel like you're optimized that? It's really more about rolling out broader coverage and getting those ASPs up in general. My sense there is that, okay, there is still an opportunity that's there for us because we started to look into the collections from two different angles. One is, of course, the Medicare Advantage payer. And the other piece is as to how do we improve our RCM cycle per se to be able to get paid and follow the process that some of these private payers have put across, which makes us a lot more difficult to actually collect the money. What you have seen so far where I called out in Q3, like one-time adjustment with one of the large payers, or what we saw in the first quarter, that's mostly around the Medicare Advantage payers where we have been pursuing these guys for the last six quarters or so. They were not very easy to bring to the table, but now we have started to see the traction play out. So my sense is that, yes, we are still in the discussions with many other Medicare Advantage payers. Very difficult to call out as to how the negotiations with these payers will take place. So there is some money to be had on those discussions. And the second piece on the RCM, definitely there is opportunity as we build our prioritization and a few other pieces. And with John's background, I think we are looking forward to kind of hone in and focus on our RCM efforts as well. Yeah. I mean, I think RCM is a business process that always can be optimized. So we're always going to push on that lever to try to drive greater collections. We have not realized much of the opportunity in that space yet. So there's a lot of headroom to go solely just in collecting cash on claims that are approved for payment, right? Then there's the coverage component to it on top of that. So the team is working diligently on this to Abhishek's credit, and we're just going to continue to push on it. Got it. I want to stay within Testing Services. Before we get into heart and kidney, talk a little bit about AlloSure Lung, which received Medicare coverage approval last year. How are you thinking about growth and revenues for this test? How meaningful can it be? What are some of the obstacles to that growth over time? And how do you think important of a segment could that be for your testing services? I mean, I think it could be an incredibly important segment. As you know, with expanding the product portfolio, it's all about layering in revenue for the business. And that's how we think about it. When we add another organ, we have additional organs in our pipeline. And my expectation is that the lung product will become standard of care just like it is in heart and as it is we're progressing toward in kidney. That's going to take time and data. There's an adoption curve to these products in the marketplace. Lung is a particularly tricky indication because of all the infection and things that happen in lung transplantation. We're looking at how do we support that particular clinical indication, not just with the AlloSure Lung testing, but perhaps with other services, maybe in partnership, maybe organically developed to help prop up the use of this type of testing in the lung indication. It's an indication that I really like and I think is definitely going to be contributing to revenue in the future. Got it. You've talked previously about the heart franchise potentially expected to grow faster than kidney. Do you still expect that this quarter based on what you've seen so far from volumes? And how should we think about that sort of change in mix? Does it change anything financially? Kind of what are the benefits and the drawbacks? Or just how should we think about that change in mix? Yeah. I think the heart so heart is growing faster as a in the marketplace, the rate of growth in heart transplantation is higher than kidney, number one. And as such, our volumes are growing in that equivalently. And we're seeing broader penetration or adherence to the testing because of the data that has come out over the past year around the use of HeartCare, the joint AlloMap, and AlloSure Heart together. So we're seeing nice growth in that space. I think that the kidney growth has caught up because we're seeing a kind of clawing back of the volume that we lost in Q2 of last year as clinicians have become more comfortable with the testing protocols and documentation requirements to get paid. So I don't see any dramatic shift in the coming quarter. Our expectation, as we provided in our guide, is that we continue to grow in all three indications in testing services throughout the balance of the year. Got it. Okay. And how do you kind of see the overall top line tracking throughout the remainder of the year now that the billing article baseline has kind of been reset? How are you thinking about it in terms of your guide and your growth? And then how does that feed into sort of the longer-term growth algorithm? The way we guided Matt is basically we are resuming growth and sequentially growing every single quarter from here on as well. It's just that we have been trying to be prudent in terms of calling our growth for the outer quarters here. But there's no reason for us to believe that, okay, the volume growth is going to slow down or things like that. So we are now guiding that, okay, our testing services revenue is going to grow in a low double-digit kind of a scenario, whereas the volume is going to be growing in a high single digit. And the bridging part is going to come from the ASP improvement. But our thinking going back to what John was saying, that there's so much of secular market growth, which is basically the transplant volume increase itself. That in itself is a fairly sizable tailwind. As we grow our patient adoption and the adherence of our tests, and I'm again so glad to have with somebody like John's background from the commercial standpoint as well as on the insurance standpoint, that, okay, we should be able to kind of make a lot more progress on the adoption and the adherence part, which will be further tailwind as we kind of look forward. So I'm definitely more positive to see as to how our volumes are going to be trending from here. Got it. Then if we look at kidney post the billing article, have we seen sort of a step down and then but then normalization of the frequency trends of testing in kidney? I mean, prior to the billing article, I think the waterfall was the number of tests in the first year, and then it kind of stepped down. Has that kind of all taken a bit of a step down, but now we've normalized that? So we're going to continue to grow at a sort of reduced frequency, or am I not understanding that? Yeah. No, I think you're thinking about that the right way, right? Everything took a step down, and now we're building it back up. And I think it's really, as I say frequently, the change in the policy was kind of an administrative change in the documentation required to get paid. And as we go account to account and get customers comfortable, clinicians comfortable with the scenarios in which the test is reimbursed and the documentation is required, we see that volume coming back in those centers. Got it. Can you talk about sort of the SHORE study and the recent updates that you received there? I think it was an important piece of clinical evidence that I think people. Yeah. We were really excited about the SHORE study. I think the SHORE study that was published recently was a two-year interim readout of a five-year follow-up study. This is one publication of many to come in HeartCare and heart transplantation. The initial publication really showed that over the course of the study, which was a four-calendar-year period of at least two years of follow-up per patient, the behavior of clinicians changed significantly. The proportion of patients that got a biopsy following a dual positive result in both AlloMap Heart and AlloSure Heart increased over time. The patients that got a biopsy following a single positive or a dual negative declined over time. So the total number of biopsies over that period went down by about 10%. The key here is the right patient is getting a biopsy and the likelihood of that patient having rejection with a dual positive is higher statistically than a patient with a single positive or a dual negative result. That's really the type of behavior change and statistical significance that we want to see in a study like this. We'll continue to follow all of these patients out to five years of follow-up and demonstrate that when they use HeartCare to monitor these patients for rejection, the clinical outcomes of those patients are as good, if not better, than when we monitor them with biopsy. Yeah. I mean, because in the past, there have been some questions about multimodality and the efficacy of the multimodality approach. I think in heart, it's certainly been proven, and SHORE goes a long way to do that. Could you kind of talk about, most importantly, not necessarily investors, but the doctors and the transplant centers, where are they on multimodality? And not just in heart, but across other organs. And how do you continue to drive that multimodality, improve the efficacy, and benefits to patients? Absolutely. So today, heart is the only indication where we promote multimodality in the marketplace. We're obviously studying this in R&D settings in kidney as well. But we think that multimodality is really important. And we think that the data suggested that you have this gene expression classifier in AlloMap that is really geared toward T-cell mediated rejection. That's how it was trained. That's how it was developed. It's FDA cleared to identify T-cell mediated rejection. And then you have AlloSure, which does probably a better job in identifying antibody-mediated rejection. And so the combination of the two just gives you a higher predicted likelihood that rejection is happening in the organ. And despite anecdotal comments that clinicians may make saying, "Well, I think that I just need one test to get the answer," the observational data of SHORE shows that they really did rely on both tests. In the context of the study, when both tests were positive, they did many more biopsies than when a single test was positive. So the behavior in the study is very clear that they do appreciate the value of both tests together. Yeah. And also, just to add quickly to what John just said, if we look at the clinical adoption, we have called out the attached rate, which is like greater than 90%. So that basically is another proof point, Matt, as to how widely adopted the tests are because there is a lot of utility of doing these two tests together. So I just wanted to make that point. And so how do you take that success in heart care to kidney and then potentially lung? Are there some obstacles, barriers that maybe I'm not thinking about that where multimodality might not work in a different organ like it does in heart? Or is it just sort of just having the evidence and providing that evidence? I think it's the evidence and doing the right clinical validation studies. By and large, T-cell mediated rejection is the bulk of the rejection that occurs in the first year post-transplantation, which is really where the gene expression classifier performs best. And so adding that in a kidney setting could be incredibly valuable. But we need to complete that clinical trial and make sure that we have the evidence to support it before we go out and, A, ask for payer coverage and, B, start promoting it commercially. But I do see multimodality as important here. The other area of multimodality that we're looking at is potentially identifying that T-cell mediated rejection or cellular rejection based on another assay off of that same sample, right? So rather than running two assays in parallel, if I get a high result on AlloSure, can I run a second assay off of that sample to give me that answer as to what the origin of the rejection is? So we have a number of R&D programs ongoing in this space to really think about how is multimodality best applied in kidney or in lung versus heart because each clinical scenario is a little bit different. Yeah. Okay. Could you maybe talk about sort of additional coverage decisions, probably on the commercial side that you're anticipating across some of your product lines, things that you've been working on, and any kind of leverage you might have with payers to kind of drive that forward? It's a long process, always longer than I think it's going to take, but yeah. Yeah. Having leverage with payers is like an oxymoron, right? Nobody really has a lot of payers. Yeah. You're like, "Yeah, but Yeah. You're like, "Yeah, but I... To your point, yes. So first and foremost, in heart, the bulk of patients that undergo heart transplantation are commercially insured individuals, right? And in that indication, the SHORE data is substantial in demonstrating the value of AlloSure Heart to the combination use. AlloMap Heart is broadly covered today in the private markets, as you know. And so we're pushing aggressively because the most frequent objections you get from payers are, "There's no long-term follow-up data," right? "This doesn't compare against the standard of care." Both of those are addressed in the SHORE data at least two years out for all patients and will be five years out ultimately. So we view this data set to be critical to driving long-term coverage of AlloSure Heart in the marketplace. And then second, on the kidney side, last week we published a study or investigators published a study in Nature Medicine showing that AlloSure Kidney is effective in identifying rejection prior to biopsy, which was very clear at time point one, no rejection on histology, high elevated AlloSure at time point two, it showed on the biopsy. So we are this early warning signal. And that was both in symptomatic patients and asymptomatic patients, really establishing the value of surveillance testing in the marketplace. And so our goal is to use this evidence as ammunition to go out and drive payer coverage in the marketplace. We are getting a little bit of a tailwind from the biomarker legislation as well, which in some states is not limited only to oncology. It's more broad in its wording. We have seen some payers say, "Yeah, we agree under the biomarker legislation, we're going to cover this service." This is going to be a big push for us here over the next 12-24 months is driving coverage of these testing services so that we can get broader network contract adoption and just smooth the path to payment. It's interesting you say that about the biomarker bills because the oncology guys don't like it when it's the broad the language is broad. It's not specific enough for them. So let me just actually slip one in here on that because the biomarker bills do have some fairly broad language, and therefore the enforceability of it with the payers. And given your experience, you know the things that they do. So how do you think the enforceability of biomarker bills is? I mean, from what I understand, it gives you additional leverage when you talk to them, but it's not exactly sort of an actionable thing. It's the same as like Medicare Advantage, right? You go to them and say, "Hey, we have an LCD and this service is covered. You're supposed to pay for it." And they're like, "Yeah, so what?" Right? I think that ultimately my belief always has been you have to have an overwhelming library of clinical evidence supporting the medical necessity of the testing service. That is what we will strive to do. We can't rely solely on legislation or solely on practice guidelines. We have to generate the evidence. As a company, CareDx has a history of investing in prospective clinical trials published in high-tier journals supporting our products. We will continue to do that going forward because we believe these services add value and are medically necessary and should be reimbursed. Got it. Okay. Moving away from testing services, I mean, testing services is the bulk of revenues, and that's what gets a lot of attention. But I do think patient and digital solutions business has been actually quietly growing at a really nice clip and becoming more substantial. And so I feel like in a few years' time, we'll be talking a lot more about it. So maybe just kind of talk a little bit about what that business is, to what are some of the drivers of growth that you see sort of near- and long-term in that business? And then maybe sort of a financial profile of that business. Yeah. Yeah. So it's a great business, quite frankly. And it brings us closer to the customer in the end. So our digital and patient business is a software business that provides waitlist software to match organs to donors for the center, a transplant EMR, a medication adherence software post-discharge. And then a really probably the most popular tool that we offer is a quality management software for reporting outcomes in the center back to the agency. And that suite of solutions enables us to have a relationship with the center that we otherwise wouldn't have if we were just selling them diagnostic testing. And the tailwind behind that really is this IOTA model that the agency came out with where they're trying to drive increased utilization of organs, increased transplantation at the same level of quality. We offer a suite of products and solutions that enable them to do that. So I think that it really is an important vector of growth for the company. It may not just be growth from a revenue perspective. It may be in enabling more testing services as well. We see synergies there. We're trying to optimize that synergistic kind of go-to-market motion today so that we see that lift in the marketplace and make sure that we have an overlap between testing and digital in the marketplace. Got it. If you wanted to know a little bit more on the financial profile, so I can quickly touch base on that, Matt. But making one more comment there that we have publicly said that 70% of the centers, they use like one or the other digital services solution. So that provides us a lot of leverage too, right? Because if a particular center is already using one of our offerings, then as we kind of go to the same center and how we leverage our CareDx Pro to enable other functionalities, which is a lot more easier for us to continue to grow that business. And then coming on to the financial profile, I think there are two different elements on the financial profile. One is basically the transplant pharmacy business, and then you have the rest of the digital solutions business. When we look at the gross margin profile, which is, say, in the mid-30s, unfortunately, transplant pharmacy by the design itself, because it's a pass-through business, your gross margins are extremely low. Whereas when you look at the core digital solution business, the gross margins are pretty healthy. So I think from the financial profile standpoint, this is probably the most important distinct feature. We are actually looking into how we start to provide more color on the gross margin profile of these two pieces so that everybody can more appreciate how our core digital solutions business is actually fairly profitable and growing. Got it. Okay. Maybe just talk a little bit about the MediGO partnership and how that's improved the transplant workflow as well. Absolutely. MediGO is this front-end process around waitlist support and getting the right organ into the right patient. And that is an important program that we offer to centers and make available such that they can expedite getting patients into transplantation. We think that's an important set of services and offering to ensure that the volume of overall transplantation continues to increase in centers. And as we talked about on the call last quarter, we have certain centers that have come to struggling either at the level we want. How can you up our transplant program so that we don't get into a system that's our accreditation? And that's where programs like MediGO, OTTR, and XynQAPI, our quality service system, have been really critical. Got it. And then Abhishek, could you just talk about profitability targets and kind of remind us where you kind of are on that and what the path to that is? No, absolutely. This has been one of our goals as how do we kind of be fairly we set ourselves up to return to profitability, and then we took a lot of actions last year, Matt. When we look at the Q1 results, we were like under $2 million on the adjusted EBITDA losses. So I think we have gained a lot of ground. And as we look into driving the operating leverage, where our goal is to basically increase our expenses bare minimum and try and drop most of the incremental revenues to the bottom line, my sense is that getting back to profitability is not very far-fetched. Guidance on the return to profitability, and we will provide more clarity as we kind of go further. But in our mind, we will be setting ourselves up in the current year to come back to profitability in 2025 if I were to kind of anticipate this, though I don't want to be providing the guidance as of right now. Got it. When we think about sort of the things that you guys have gone through over the past year and a half, capital deployment would not have been a question. We're sort of emerging out of that. As you think about some of your strategic priorities, whether it's M&A or just partnerships or things that you feel that are holes in your portfolio that you would like to fill, either organically, inorganically, maybe through partnerships, how are you thinking about that? Yeah. We're trying to think about a long-term strategic plan for the company that gets us back to a growth rate that the market is really looking for for a mid-cap stock, right? So that's how I think about it. And I'm actively assessing our existing pipeline of products against our current portfolio and what we think we can do from a revenue growth rate with the existing portfolio, what we can do by launching some of the pipeline stuff, and then where are the gaps. And then we'll think about capital deployment from there. Today, we don't have any plans to actively go out and acquire anything or spend any of the cash. We really want to have it sitting on the balance sheet right now just to be a healthy company that's debt-free, good cash position, charging toward EBITDA. Kind of set out that five-year plan and really company, then we can go out and execute and utilize that cash in a way that's going to accelerate growth for the company. Just maybe in closing, I mean, one thing that I wouldn't say surprised by, but really encouraged by when you went through all the issues with the billing article last year was sort of the outpouring of support that you had from the transplant community, not just customers, but also. While you would not have drawn it up that way, I wonder if the relationships with your customers have actually strengthened. Capitalized is not the right word, but how do you make sure that you kind of continue that momentum with them, whether it's new products, services, customer service, etc.? How do you continue that momentum so you can actually drive that longer-term growth? Absolutely. I mean, it's an ecosystem, right? Technology companies like CareDx exist because of the clinical community, the patient community that we serve, and vice versa, right? They're able to advance the quality of care they provide because of the solutions we provide to them. And so they're there to support us when we're in need and have a policy issue. And similarly, we support them in their policy issues. CareDx has a long history of supporting the transplant community in areas like coverage for medication. So there was a bill that we supported that got passed that allowed Medicare to continue to pay for immunosuppressant medications post-transplantation in areas where patients were getting dropped from coverage. And so these are things that didn't benefit us financially as a company, but they were the right thing to do. We will continue to do that as a company because it's important that we support that ecosystem that we're a part of. And so, yes, we have gained from, I would say, goodwill from those activities, and we'll continue to provide that goodwill to those partners in the marketplace when they experience issues as well. Great. Well, John, Abhishek, thank you so much. Thank you very much.