All right, thank you. Is this yours? No. Good afternoon, everyone. I'm Evie Kozlowski, head of the life science tools and diagnostics team here at Goldman Sachs. I'm joined here today with CareDx. Thank you for coming. Thanks so much for having us, Evie. We really appreciate it. I'm John Hanna. I'm the CEO here at CareDx, and I'm joined by Keith Kennedy, our COO and CFO. Great. Just to kick things off, your strategy since joining the company as CEO, John, has been to transform CareDx into a precision oncology leader. Can you talk through the strategy and what this means at a high level and any key initiatives that you have in place to achieve this precision medicine goal? Yeah. Thanks so much. We really view CareDx as a precision diagnostics leader. When I got to the company, we did the typical thing as a management team to take a review of the entire business and understand what are our strengths and weaknesses, where do we really want to play, and where can we win as an organization. In that strategic review, we identified that really the core competencies of the company are around building belief in molecular testing as a standard of care with healthcare providers, pulling through repeat testing in indications where patients are having tests ordered by a provider over a set schedule, and we have a team that interacts directly with the patients that schedule those blood draws and pull through the testing. Lastly, it's around evidence generation, which again gets back to that concept of building belief, also driving reimbursement for these tests. We looked at our full portfolio and all the businesses we were in and decided that our testing services, our patient and digital solutions, which includes our software products and our pharmacy, which are all geared toward healthcare providers that are ordering our testing, were very synergistic with one another. Our IVD business, our lab products business, did not fit into that category. Thus, we pursued a strategy to divest the lab products business, accelerate our pipeline, in particular, our AlloHeme asset, which is our lead pipeline asset, in AML and MDS for relapse detection, then do inorganic growth in the form of the acquisition of Naveris, which is a fantastic business focused on viral-mediated cancers. We have really transformed the portfolio of the company to being one that is truly a leader in precision medicine diagnostics. I did want to touch on the Naveris acquisition. Really, this allowed you to expand your reach within the MRD market. I guess, help us understand how this fits into your broader portfolio and why CareDx is the right owner for this asset. Yeah. We think about our strategy as wanting to be number one in the markets that we are in, which I think is really important, because inevitably, as the leader in a market, you're going to end up spending less in sales and marketing to acquire another sample than you would be if you were number three or four in that indication. Second, we want to be in indications where there's a high cost and burden of disease and where the patients are managed by a subspecialty group of concentrated group of providers, and where there is repeat testing, where we can use our core competencies to pull through that repeat testing. Lastly, markets that we can service, what I would describe as the CareDx way, with our solution-selling strategy, including software and pharmacy. The Naveris product set, NavDx, fit that profile in that it is the market leader in head and neck cancer MRD. This is a relatively concentrated group of providers, in particular the ENT surgeons that initially diagnose and treat those patients. It is a repeat testing in a high cost and burden. We felt like as a company, we have core competencies that we could lend to that business to really drive and accelerate its growth, and it fit very well with our other solutions. I'll also add, the other thing about Naveris that made it very attractive to us, especially as an initial acquisition, was that it was a relatively de-risked asset. Right? The product has already gone through development, validation studies. There's about 56 publications out there in the peer-reviewed literature on the product, and it's already obtained Medicare coverage. We thought this really hit our sweet spot around driving clinical belief and awareness, generating evidence, and pulling through the testing that our core competencies could really be lent to this product set. Okay, great. I guess from a strategic perspective, MRD is a very competitive industry, Naveris has maybe a more specific niche within the viral-mediated cancer. I guess, how does this more niche application give you a competitive advantage in the market? Yeah. I think the key here is we've selectively decided to enter the MRD market, both in AML and in viral-mediated cancers, where we have a technological competitive advantage. In AML and hem oncology, our asset there is really focused on patients who have undergone a hematopoietic stem cell transplant, and we're monitoring for relapse in that indication, and that's an assay and a technology that's proprietary to CareDx that has a great validation study around it. Similarly, here in viral-mediated cancers, the technology to detect tumor tissue, viral-modified tumor tissue, is proprietary to Naveris and has a patent portfolio protecting it. We think we have the right to win in those markets and have a strong technological differentiation of our products. Great. I think you mentioned the acquired. How should we think about the longer-term margin goals if you're able to drive scale? Yeah, they generated 65% margins in the first quarter of this year. We're doing in the high 70s on our testing service business, I'd expect that business to do in the mid-70s long term. We probably have a nice lift, not as much uplift as we have in our CLIA testing on the solid organ side, we do have upside there. We think operationally, there's some things we can do at scale that a smaller sub-scale business can't do in terms of the operating margins. On the OpEx side of the house, we think clinical trials and evidence generation will be a key item. Sales and marketing will be a key item. On the G&A side, we think we can put a lot of those services on our platform. Great. You mentioned the clinical data. Is there any key catalyst that I guess we should keep in mind within the MRD market, new indications you would look to expand into? I guess, any other growth drivers that we should think about within this asset? The company has already obtained coverage for head and neck and anal cancer MRD. I think the next significant catalyst would include, first, coverage in the gynecological indication for MRD. There was some development work to be done on the assay there, ultimately validation and submission for coverage, which has not happened yet. Second, an area that is really unique to Naveris is the indication for aid to diagnosis. This is the indication where you're using the assay to help diagnose HPV-positive cancer, and that is differentiated because other assays are not used in that regard. Today you have standard HPV testing, which just tells you, does the patient have or not have the HPV virus? The Naveris test is specific for viral-mediated malignancy. In a setting of, let's take head and neck cancer, for example, where the patient shows up with either a persistent sore throat or difficulty swallowing, and they attempt to biopsy a lesion in the throat, which can be difficult to access for an ENT surgeon. The test can supplement that diagnostic process and lead to a more accurate diagnosis or yield more malignancy diagnoses where tissue may be unattainable or non-diagnostic. The company has already gone through the process of requesting coverage in that indication. That's a net new indication which will require a new coverage policy, it'll take time. I view that as being the other really significant catalyst from an evidence perspective or coverage perspective that'll drive revenue growth for the company. We really like this aid to diagnosis indication because it allows you to capture the patient at the time of diagnosis. You could imagine a head and neck surgeon utilizing the diagnostic test, diagnosing the patient, then getting a baseline value of the NavDx test, which is both qualitative and quantitative in its result. After definitive treatment with surgery, radiation, chemotherapy, continuing to monitor the patient quarterly with the testing for recurrence. We think that's a great model to pull through the testing, and we're really excited about the opportunity there. Awesome. Very exciting. The other recent portfolio change was divesting the lab products business, which you mentioned in April. I guess, how are you thinking about strategically reinvesting the proceeds from this and/or your management focus back into your core competencies? Yeah. We announced that we're reinvesting that in Naveris. We sold the lab products business for over three times revenue, and we generated $170 million in proceeds. We'll probably net $160 million after expenses, and that's the price we paid for Naveris. We feel like that it's almost a one-to-one exchange there for a smaller TAM, smaller growth rate, international, high regulatory business into a CLIA. Our business is really CLIA generated in the U.S., so it puts us more management focus in on the CLIA side of the business, higher margin, higher growth rate. Yeah. I'll just add there, we have an exceptional team that manages that lab products business, and I've really appreciated all the work that that team has done over the years to create what really is the market leader in HLA typing globally, both PCR kits for deceased donor typing and NGS kits for recipient typing. We believe that this divestiture puts that business in the hands of a company, Eurobio Scientific, that we have had a long-standing partnership with, and we think has the scale and core competencies to execute on that business, really with a focus that we didn't have. We're going to turn our focus back to the testing services. Then, of course, on the acquisition side, the team in Naveris has done an excellent job building that business to where it is today, operating at a cash flow breakeven. It did roughly 70%-ish revenue growth year-over-year last year. We guided in the call 30%-40% growth over the next three years. We are very excited to have that team join CareDx when the deal closes because there's a tremendous amount of talent there and people that are really dedicated to serving patients that have head and neck and other viral-mediated cancers. Great. Shifting gears to AlloHeme. Earlier this year, you published results from the ACROBAT study. As you work towards launching AlloHeme as part of your Transplant+ strategy, how should we be thinking about next steps, and what needs to be accomplished before the planned launch? We're really excited about this indication. AML is an indication that is not really serviced by MRD or relapse detection assays today. Those patients are predominantly monitored with bone marrow biopsies, which as you can appreciate, is not done that frequently because of the invasiveness of that procedure. Other types of testing that are utilized in this space, like short tandem repeat assays, are not very sensitive for picking up relapse detection. We initiated a clinical trial in this space several years ago. It was a two-year follow-up trial that had a number of sites, I think 11+ sites involved, over 200 patients. What we found was that the test had a really amazing sensitivity and specificity for detecting relapse and gave the clinicians a lead time of over 30 days of identifying relapse before traditional methods, whether it be STR or bone marrow biopsy or just clinical presentation into the practice of having relapse. There's a lot of excitement in the marketplace about this assay and its utilization and the ability to then treat patients, presumably before clinical presentation of disease. Thus, we're trying to get to market as quickly as possible. In February, when we shared the readout of that data on our investor call, what we said was, first and foremost, we need to get the data published because clinicians, especially in oncology, they treat based on publication data. They want to see the performance of the product. We are working toward getting that submitted likely this quarter, and with the hope that it gets in print before the end of the year. The second thing we're doing is completing all the analytical verification work for the assay. This is the technical work where you look at inter-lot variability of the assay, operator variability, run-to-run, et cetera, split samples, run them two, three times, and see, do I get the same result? We have a lot of confidence in the robustness of this assay, so that's not a concern. You do have to do all the work and then submit it to New York State to get approval. Additionally, that analytical verification work is a large part of the evidence packet that gets submitted for coverage. Our goal internally is to have both the New York State submission and the coverage submission completed before the end of this year. We will launch in Q1 2027 commercially, probably around the time of a tandem cell therapy and stem cell transplant conference, then presumably look to get the product covered and reimbursed sometime in 2028. Okay. Awesome. Very exciting. I guess from a commercial perspective, how are you thinking about the care sites for AlloHeme relative to the penetration you currently have in your existing portfolio? What are your strategies for clinical education and expanding relationships with those oncologists? Yeah, that's a great question. We have been focused this year on medical education. Our team, our franchise team that is driving AlloHeme forward, is predominantly a medical team, MSLs, medical affairs clinicians that were running the trial, working closely with the sites, and now are analyzing the data both for the initial publication and subsequent publications, then using that data to educate clinicians that perhaps were not in the trial and didn't enroll and participate, so that we have broad clinician awareness of the product before we even launch commercially. As we said in the investor call, there are about 200 sites across the country that do stem cell transplantation. These patients have high-risk AML, high risk for recurrence. They get a stem cell transplant. Those 200 sites are very much overlapped with the 200, 250 sites that do solid organ transplant across the country. We have coverage in these sites, but not always with the hemonc side of the business, we'll be standing up a team to focus on this initially and drive the initial adoption of the product in those sites in a way that is measured, of course, because we don't have coverage yet for the product. We don't want to go crazy right on tests that are not getting paid for. I do think market adoption is really important, even ahead of reimbursement, especially when you have a novel assay like this that is really building a new market. As we think about sort of some of those investments, I guess, how should we think about how large the OpEx spending related to this is ahead of getting coverage? You already completed the ACROBAT study, any additional investments in the commercial team. John mentioned, I think the majority of the spend will be on the commercial and medical affairs side and less on the infrastructure side. The incremental costs for things like Epic legal or accounting and things like that, I think are marginal, nominal. I think the financial KPIs around this product will be in line with our testing service KPIs. You'll think of gross margins and EBITDA margins in line with our testing products. Okay. Are there any learnings, I guess, from Naveris' existing commercial team in coverage pathway that I guess you can actually apply to AlloHeme? Absolutely. It is an MRD assay, it'll follow the same coverage pathway. We've certainly talked with the team there through the integration planning process about their submission. Obviously, we have a very seasoned team at CareDx from a market access perspective, we understand the coverage processes and really ensure that the design of the ACROBAT trial was adequate to get coverage for that product. We feel really good about where it is. Again, it doesn't hurt that the data is really strong on the product. Definitely. You guys have been very busy. You're also working on expanding AlloSure into liver. I guess, are there any targets in terms of timing of data from the MAPLE study or expected launch-related updates that we should look out for? Yeah, we haven't given any timelines on that. We're still collecting follow-up data from that study. I think there's a huge unmet medical need here in liver. There's no molecular testing for monitoring for rejection. We think that this is an indication where the volume of transplantation continues to grow more rapidly than other solid organs, and the use of marginal livers is significant in that space. We see a lot of perfusion technology there driving the use of more organs in liver transplantation, and when I go out to centers across the country that have abdominal transplant programs, most of them that do kidney also do liver. Oftentimes when I talk with the surgeons there, the number one thing they ask me is, "When are you going to launch in liver?" Right? Yeah. I tell them what I say here, which is, "We have a trial. Right. We're completing the validation follow-up. We're going to publish that data. Hopefully we'll have a robust package that enables us to really define what is the intended use population of that product and how should it be utilized in the market. It's different in every organ, right? For example, in kidney transplantation, our protocol is seven tests in the first year and then quarterly thereafter. But in heart and lung, it's 11 tests in the first year. It's monthly. The follow-up cadence and management of those patients and the cadence at which they do other serum-based monitoring tests varies organ by organ. Okay. You touched on this a little bit, I guess maybe talk through some of the benefits of AlloSure already fitting seamlessly into your existing workflow and relationships. I guess, being able to use the infrastructure that you already have in place. Yeah, absolutely. The same for AlloHeme, right, or Naveris. We feel like we have built infrastructure for workflow optimization inside of specialty clinics. That includes the investment we made in Epic and Epic Aura so that we can provide direct ordering and reporting into the EMR system. Our CareDx CARES team, which is distributed across the country, really serves two functions. One is supporting workflow inside of the practice around ordering and reporting. The second is around engagement of patients to pull through and schedule those blood draws. We're very focused on workflow as a company, and in our last earnings call, I talked about this as our commercial strategy having really two motions. One is clinical differentiation and the second is workflow optimization. Everything we do that is field-facing is oriented around those two activities. Okay, great. I guess turning to your existing portfolio, you have impressive penetration within transplant centers. I guess, how should we think about the opportunities for CareDx to continue growing test volumes, even in environments where transplant volume is maybe more muted? Yeah, the secular market has been rather flat the past two years, we've seen this in the past with transplantation. You tend to have a flat market for a couple of years, it'll suddenly grow by 10%. It'll be flat for a couple of years, it'll step up another 10%. I think some of that is related to just the capacity, right? The surgical suite capacity, the bed capacity in the centers. You build up a program to 300+ transplants, then they've got to take a deep breath and say, "Okay, do we have enough resources to do more than this?" We're seeing that dynamic play out in the marketplace. Despite that relatively flat year-over-year rate, we're growing at 17% year-over-year in our testing volume. I really attribute this to selling deeper into existing accounts. What we've seen over the past year and a half or so is a focus on building belief and awareness in molecular testing as a standard of care across heart, kidney, and lung transplantation, which has allowed us to outpace the growth of the market substantially. In particular in heart, as more data gets published showing that HeartCare is prognostic both for graft dysfunction and CV-related mortality, the utilization of the testing is increasing, and clinicians are doing fewer biopsies, which is great for patients because getting a cardiac biopsy is not a pleasant experience. The data shows that it doesn't help detect rejection any better than using molecular testing at all. In kidney, we're seeing growth in the business both in the return of surveillance adoption across the country, but also in for-cause testing. In our last call, I said that 50% of our kidney transplant volume is for-cause testing, meaning the patient has some clinical sign or symptom that leads to the test being ordered. We have been very focused on for-cause indications as a company and helping both elucidate how the test can be used in for-cause settings, but also publish data on for-cause use cases. For example, the transition from dual therapy of tacrolimus and prednisone to monotherapy belatacept, which is a broadly utilized practice across kidney transplant centers because belatacept has a lower toxicity profile than tacrolimus, and therefore they believe that the patients survive longer without complications if they can get them onto that monotherapy. The lower toxicity comes with less efficacy, though. Right? You want to monitor those patients closely to ensure that they don't have a rejection event. These types of for-cause use cases are what we have focused on in the marketplace, and it's allowing us to grow both the surveillance utilization and the for-cause utilization hand-in-hand. Okay. The other thing I wanted to touch on, we're approaching about a year since the draft LCD from MolDx on transplant testing. I guess, what's your latest thinking around timing of when we could get a final decision? Maybe remind us of the various scenarios that could play out, from a financial perspective, on the business. Great. Yeah. We still anticipate that the policy will be finalized in the first half of this year or sometime around the anniversary of the draft date, which was mid-July. Generally, CMS follows their own rules to get these out within a year or they withdraw the draft. We think this one will get finalized. There's been no indication otherwise from the contractor or from the agency. In our public remarks and in discussions with investors, we have laid out a scenario that is consistent with the draft itself, because that's all we really have to go by. It's here's what the draft says, which is that kidney testing would be paid in a bundle of four tests in the first year. Because we believe over time, patients will get more than four tests in the first year, we assigned a $7.5 million headwind to that on an annualized basis. Heart testing, the policy said that it would pay for heart testing in a bundle of 12 in the first year, then two in each subsequent year. Today, we do, on average, four tests in year two and three for heart transplant patients, which would create another $7.5 million headwind. A total of $15 million on an annualized basis. We built into our guidance, assuming it finalizes midway through the year, $7.5 million as a headwind for the second half of the year of reimbursement. Importantly, as I've been articulating for the past year, this should not impact volume or utilization of the product. Right. We focus on promoting the use of the test, consistent with the clinical validation studies, which is in kidney 744 and in heart 1244. Number two, supporting the clinicians in ordering the test the way that they feel is appropriate for their patient population. Not every kidney program in the country that does surveillance testing orders seven tests in the first year. Some of them do five, some of them do four, some of them do six. Right. It's up to their schedule on how they manage the follow-up of their patients. We're not going to change the way that we promote that, because it is important, I think, for us to drive total penetration and adoption of the products in the marketplace. We recognize that Medicare fee-for-service is only a small slice of our overall business, right. If a private payer is going to pay for kidney testing on a per claim basis, we want to ensure that if the physician wants to order seven, they order all seven and all seven will get. To follow suit, or you think that they would have their own? They will continue to make their own coverage decisions. Okay. We have not seen any evidence in the marketplace that commercial payers follow these very esoteric Medicare coverage policies with bundled payments. That has not spilled over into the private pay market yet. Okay, great. Then you recently are starting to do these Epic integrations, I guess. How much of an upside could this be to your current guidance, and what has the feedback been on the centers where you are already integrated? Yeah, the feedback has been very good. We are in the early innings of this. We are hoping to lift from about four to six a quarter. In a perfect world, I would like to have the team up to eight to 10 a quarter. Our pipeline of end implementations right now is around 16 centers, and we expect that to continue throughout the rest of the year. Generally, people have seen uplift. Epic likes to guide around 10%, Exact Sciences in a world headed very high because of the channel they went after. I do not think we will have that high of an uplift, obviously. I do feel there will be an uplift, and I have told the Street that when we get to 20% implementation, I will come out and talk about what that looks like. My concern right now is that I talk about this too early and people start projecting this to occur, and then we disappoint the buy side. Fair. Your team has also done a lot of work kind of improving the revenue cycle management, I guess. When should we- Yeah. Start to see the benefits of the out-of-period revenue start to stabilize? How much work do you think is left to be done on those types of initiatives? Yeah. We have said publicly, we're targeting internally the team to get to $2,000 per test, average payment per test. February, on the Q4 call, I came out and said that we would average around $1,400 a test. I came out in April on the Q1 call and said we'd end the year at $1,460. Hopefully, as the year progresses, you're going to-- per test migrate into what [I-- quarter], which people look at as the average sales price or ASP. Your long-range plan targets 20% EBITDA margin. I guess beyond the divestiture of the lab products business, what specific operational steps or infrastructure consolidations are required over the next several years to kind of achieve this profitability milestone? Internally, we're focused on shifting our R&D resources into innovation As part of that, there's operational aspects of how you go to market, which requires consolidating your lab information systems. You'll see a lot of lab companies, you'll hear Neo talk about they're consolidating their LIMS systems. You'll hear about us talk about it. The reason for that is there's a lot of very bespoke operating platforms and diagnostics, and that is evolving, and software is evolving. We're all going through this sort of technological revolution of building the chassis upon which you can launch a product quicker. When physicians experience something that causes friction, you want to change that. In order to change that involves a lot of software engineering, and we're all designing our systems in order to move quickly, and we're doing the same. We have an Epic Aura implementation going. We have Epic Enterprise, which we're the second lab company after Exact to do that. We're doing a lab consolidation project, and all that is geared towards aligning the operations behind the commercial go-to-market motion. Okay. How are you thinking about capital allocation moving forward? You have a new $100 million share repurchase authorization, I guess, how do you plan to balance this with future M&A or organic investments? That's a great question. We get this in every investor meeting. We're trying to be very balanced and disciplined about this approach. We still feel like investing in organic growth, specifically in our CLIA markets, that is the right and most optimal place to generate ROIC for the investors. However, we do feel our stock is very undervalued relative to our own intrinsic models that John and I look at. When we have excess cash, which we are generating at an increasing rate, we have been buying back the stock. We feel this is an opportunity to reduce our share count, continue to reward employees, but at the same time, reward our investors. That's how we're looking at it. Great. With about a minute left, what do you feel is the most underappreciated part of the CareDx story, and what are you most excited about, I guess, in the next year? Yeah. I think the most underappreciated part of the story is just, A, the tremendous impact that these products have on patients in both transplantation, heme, and viral-mediated cancers. Given that outsized impact that they have, just the earnings potential of the company. Our tests are utilized on a very high frequency and have strong reimbursement, we think that creates tremendous earnings power for the company, and that's why we felt really good about the three-year LRP that we put in place and continue to talk about to investors. What I'm most excited about, of course, is the pipeline. Right? The integration of Naveris and really taking our core competencies around building belief, pulling through repeat testing, and generating evidence, and applying them to the Naveris products and to the market. Then two, in AlloHeme, building a new market for relapse monitoring in AML. These are things that we get super excited about all the time. Sometimes we say we can't believe people pay us to do this because it's so much fun. I think that what you're going to see here is a really strong growth company through the end of the decade. Great. That's a great place to end. Thank you so much. Yeah. Thank you so much for having us. Thanks for having us. Sure. Nice job. Yeah. Thank you. you. That was good. Thank you.