Good morning. Thanks for joining us again at the 25th Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech & Diagnostics Equity Research team at Needham & Company. I'm pleased to introduce Insight Molecular Diagnostics. Presenting from the company today, we have CEO Josh Riggs. Instead of a standard presentation, we're going to do a Q&A session. If you do have any questions you would like to ask, you can submit them electronically through the conference website, or feel free to email them to me at mmatson@needhamco.com, and I'll try to fit them in. With that, thanks for joining us, Josh. We're going to go straight into the questions, and I want to start with a higher-level question, something maybe that'll be helpful to people that are a little bit newer to the story. Insight has shifted its focus from cancer testing to focus solely on transplant diagnostics and the GraftAssure test. Can you just talk about the decision to make this shift to GraftAssure and why the transplant market is attractive? Yeah. Thanks. First, I just want to say thank you to you, Mike, and to the Needham team for having us on today. Three years ago, we made a decision to pivot away from what was really kind of a growing oncology business towards transplant. What we saw was an opportunity to capture high margins with a relatively mature clinical product. We took the chance to take that transplant product, package it up, and create something that was distributable or able to decentralize and take that through the FDA. We were able to accomplish that milestone just about three weeks ago. Okay, great. I want to dive in to talk about the GraftAssure research-use-only test first. Mm-hmm. Can you talk about how GraftAssure works to detect active transplant rejection and how it differs from its main competitors, which use NGS technology? Sure. I'd say two of the major competitors out there and us all use what's called SNP-based detection. This is just using your single nucleotide polymorphisms. It's just little fragments of DNA in the blood. We're all measuring the exact same biomarker, which is the DNA that's coming off of the transplanted organ that's in the blood. I'd say what's different between NGS and PCR, outside of some ease-of-use characteristics, is that the droplet digital PCR that we use from Bio-Rad is kind of natively quantitative. We get this very nice precision at very low copy numbers in the blood. We think that that has some unique clinical use cases that we can talk about later. Okay, got it. Can you further elaborate on how GraftAssure's dual readout with relative and absolute quantification adds to the diagnostic process? Sure. I would say the fractional measurement or the percentage measurement is standard of care today. I think it's used by most transplant centers. Most clinicians are very comfortable with the fractional measurement, which is just how much donor DNA in the blood divided by the total DNA in the blood, and it gives you that percentage point. What our data has shown is that the absolute measurement, so literally just counting the number of copies that are in the sample, is a bit more of a stable signal over time. As you live with your transplanted organ, and the further you get from the time of transplant, it seems to us that the absolute measure is just a better tool for that long-term patient management. I think we're in process on creating some of the clinical data to support that idea. That's part of the reason we set up the GALACTIC Registry is to really explore the clinical utility of the absolute quantification long-term. Sure. Can you discuss the clinical trials where GraftAssure is being used? Is the test being studied for all organ rejection identification, treatment monitoring, and rejection monitoring? Yeah. I would say there's several studies that are ongoing at any given time. I think the biggest one is obviously what we did with the FDA, that we've submitted that data in, but we're rapidly spooling up heart and getting ready to go into that indication. There's the registry that's ongoing that is really looking at the long-term value of the absolute quantification and the combination of absolute and relative into a combination score. We just saw data come out in lung for the first time. This will be presented at EFI next week. It performed very well there. We were excited to see that. Every time you take your test into a new tissue type, there's always a little bit of a concern that maybe it doesn't perform like it does in the others, but it performed very well, and so we're happy to see that data be presented at EFI. We've shown data now in all four of the major transplant types, which is heart, lung, liver, and kidney. We haven't seen any data out in pancreatic yet, but I'd say the advantage of having an RUO kit out there is you start to see the creativity in the community, and they start to ask these new questions. They start to ask, how does this compare to what I've been using? How does this work in this new use case? I'd say one of the most interesting ones is anti-CD38 therapy, which is where we were in the New England Journal alongside felzartamab about a year and a half ago. I'd say that for me is probably the most exciting area of research that's going on. We have these drugs that have the chance of stopping antibody-mediated rejection, which has been a big problem in transplant for as long as we've been putting organs in people. Yeah. Okay. GraftAssure can also be used to detect T-cell-mediated rejection. Mm-hmm. Which is harder to detect compared to antibody-mediated rejection. Mm-hmm. Is there enough data to make that claim now, or do you need to generate further data? Yeah, I'd say, like most of the technologies that are in the space, that if you have active TCMR, sort of like a high-grade TCMR, we pick it up, and I think everybody else picks it up too. What we're trying to do through our research is maybe there's multiple sample types that we can look at to catch TCMR early and start to change that stage of diagnosis before you have damage and fibrosis and other problems that set in. I'd say we have early data that says that we can start to pick that up, but it's still in development. Okay. For a given transplant patient, how often would GraftAssure need to be used, and what sort of intervals? Maybe you can comment on how it's being used in the GALACTIC registry specifically. Yeah. I think we looked at, like most folks in the transplant space, we looked at the guidance that CareDx has been putting out around the routine screening, which is four times in the first year and then two times per year after that for kidney transplant patients. That's what GALACTIC is centered around. We're not doing heart there, we're not doing lung there. It's all kidney. I think that for us is a really good baseline for patients. We know that about 25%-30% of patients are going to wind up being what's considered high risk, and they go onto a different monitoring protocol, so you wind up testing them more often. We think that the average over the life of the study is going to be somewhere around 10 tests per patient throughout the study. Okay, got it. Just speaking about the GALACTIC trial more broadly, I think it's supposed to enroll up to 5,000 patients over three to five years. What would positive results do for the market and GraftAssure adoption? Yeah, I think what we hope is that we're going to see the real value of the absolute quantification shine here. That we'll have this really nice data set that demonstrates that if you really do want to monitor accurately many years post-transplant, that you need the absolute quantification. There's the other measure that we've introduced in the study, which is what we call the combination score or the combination model score. It's where we take both the absolute and relative values, and we combine them, and that creates a resolution where sometimes in a patient you'll have the absolute value will be high and the relative value will be low, or the inverse of that. What the combination score does is it resolves that difference in opinion between the two metrics. What we found is that it really improves the positive predictive value of our test, so the true positive rate. I think that is very interesting as you consider a screening environment where these patients don't have a presentation of disease. You're kind of presuming that they're in a good state, and then so if you're screening them, you want to make sure that your test has as high a positive predictive value as possible because you don't want to rule in patients for biopsy that don't necessarily need it. I think that's the most natural next step when you see a positive result, is the clinician really kind of wants to go to biopsy. We're hopeful that the GALACTIC registry demonstrates that absolute quantification is more stable as a metric over time, and that the combination of both of these scores improves biopsy yield. That when you do choose to go biopsy a patient, it's more likely that you're going to see a positive result in that biopsy. Okay. GraftAssure has the ability to sort of democratize the transplant diagnostics market by allowing those centers to do their own testing rather than sending them out. Can you maybe just talk about why the centers might be interested in something like this? What are the advantages for them to do it themselves? Yeah. In general, I think as technologies are developed in our space, they tend to be developed in these highly complex centralized lab environments or academic labs. They start to get adopted, and they start to become standard of care. There's this natural pull to get testing closer to the patient because there's no real value in sending a sample across the country if you could just send it down the hall and get the same result. I think there's really clear advantages for patients to be able to get a result potentially in the same day, instead of having to go into the transplant center, wait four or five days, then get a result, and potentially have to go back to the transplant center at that point. I think that the speed that you can make clinical decisions changes when you have a test that's on-site. I would say these centers have already invested significant resources in being able to do complex testing on-site already. We see the adoption of HLA technology, which is the matching of the donor organ to the recipient. They've already set up these labs. They've already made the investment in lab infrastructure and teams that can do complex molecular testing because being able to do testing at the site matters for transplant centers, as you're making a lot of rapid decisions. Today, if you have an acute patient come in, you don't have a way of getting a donor-derived cell-free DNA result that day. There's no option. I think that's going to change the perception of the utility of the technology going forward is once clinicians get used to having a result quickly, they're not going to want to give that up. I'd say the last thing, and while it's motivating for the hospital administration, it's not necessarily motivating for the clinicians, is the opportunity to capture some of that revenue. Right now, they're not capturing any of the economics for the clinical value that's being created. Putting the test into the lab and creating an opportunity for them to bill $2,753 per result is meaningful and motivating for hospital administration that's dealing with increased price pressures and cost cuts through PAMA, so on and so forth. This is seen very positively from their point of view. Okay, great. I guess conversely, are there any reasons you could think of where transplant centers might not? Mm-hmm Want to do it locally and continue to send out the test? Yeah. If you don't already have a lab, and you've externalized that type of work at your facility, it is much more of a lift to try and bring something like this in-house. We know that not every transplant center has their own HLA lab or has made that investment. I would say for those centers that have chosen for any number of reasons to not bring in complex molecular testing, they're unlikely to bring this in as well, and so having a send-out option for them is still going to be a good solution. Sure. GraftAssureIQ, which is the RUO version. Mm-hmm Is being launched with Bio-Rad currently. I think you set a target for 20 centers. Mm-hmm Last year, you got to actually 37 centers. What's the expectation for this year in terms of the number of additional centers that you can sign on, and do you think it's sort of linear? Yeah Expect a larger increase once you get the clearance for the actual clinical diagnostic GraftAssureDx? Oh, yeah. Thank you for the question. I think what we're looking at is the registry to really drive engagement for us this year. The goal is to get to 50 centers here in the United States, and I think we're well on our way to that number right now. What we're telling the registry sites is that ultimately these are your patients. As we're enrolling these 5,000 patients, our goal is to eventually turn them over to the transplant center so that they can manage those patients, generate the data themselves. We view every center that we're bringing into the registry as a long-term user of the GraftAssure democratized technology or the decentralized technology. I'd say that's the effort this year is to get as close to 50 here in the United States, who are very comfortable with our test because they're using it as a part of the registry. They're seeing the results come in. It gives them an opportunity to do additional head-to-head work and show to their clinicians that, hey, you can get the same result by using this version of the test versus the test that you've been using in the past. I think we've seen three datasets come out so far that shows that on a fractional measurement, we're seeing equivalency data that's showing really nice between us and the competition here in the United States. If we've got 50 centers in the United States that have engaged with our technology by the end of the year, they've used it in head-to-heads, or they've used it for clinical purposes, I think we're set up very well for when we have the FDA product to launch that into that community. Okay, got it. I think 11 of the 37 centers are outside the U.S. Mm-hmm. Can you talk about the outlook for GraftAssure outside the U.S., and when do you think you could get E.U. IVDR clearance? Yeah, thank you. We love our European centers. We've done a lot of work, and I'd say we've seen some really fun research come out of those pilot sites. Broadly, Europe plus the U.K. has not chosen to cover this technology. It's a pure cost for transplant centers right now, and they have no ability to get reimbursed for the testing costs through their government payers. We know that there's work ongoing, and some of our competitors have been out there pushing on this as well. There's almost a group effort here to convince European payers that this is necessary and useful for management of patients. I think we're hopeful that we'll see the first one or two of those countries make a positive decision this year. We'll be submitting to TÜV SÜD, who's our notified body there in the E.U., either at the end of Q2 or early part of Q3 this year. That's somewhere between a six and a nine-month process from what we've been guided to today. That puts us most likely in Q1 of next year for an IVDR-listed product. I would say we'll expand behind any kind of market access success. If France decides to pay for it, we'll start to invest more heavily there. Okay. That makes sense. For the transplant centers that are already using GraftAssureIQ or the research-only version. Mm-hmm How are the volumes trending, and have you seen any of these transplant centers use up the supply that they got at no charge and start to actually buy tests? I guess what I'm getting at is, are you going to start to generate any revenue from the RUO version, or do we really have to wait till the FDA-approved version's launched? I would say for meaningful revenue, we're likely waiting until the FDA launch. What's happened with the RUO sites is they've done their initial work. Many of them like Tampa, and among others, I'm only bringing up Tampa because they've been public about their experience. They've done the hard work, which is, they've run it against some clinical samples, and they're starting to go through the process internally to figure out how do we bring this in? How do we deal with our payers if you're in Europe and, or how do we deal with our MAC here in the United States? I think we've seen really strong progress on those points, and I think we feel comfortable saying that we're going to have some RUO revenue this year, from sites not only in the United States but across the world. That's going to start to build. I don't want to say that that's going to change the world for us. I think that's really what happens when we get the FDA product out there. Okay, great. I wanted to ask one about the Bio-Rad agreement. Mm-hmm. Can you provide an overview of the agreement? I know they've invested in Insight. How are they going to help you sell the tests and license GraftAssure after it's cleared by the FDA? Yeah. Bio-Rad has been great to work with. They've invested in us, I think four times. At this point, they own just under 10% of the company, and the current agreement that we have with them was really to align our R&D teams. They had a work stream inside their company to get their instrument ready to go for the FDA. We had obviously our work stream, and it was really nice to be able to lean on them throughout the process of running the trial and preparing for regulatory submission, and be able to tap into all of that expertise and scale that they have. As we shift towards an FDA-cleared product, there was a milestone in the agreement, which is, we have to come to some kind of terms around what's that relationship going to be like. They have an exclusive negotiating window post-FDA authorization. We don't want to wait that long to figure out what that relationship is going to be like. I think we're actively talking with them around how are we going to support each other in the post-market scenario. What's really nice with this product is it's great for us on a recurring revenue stream, but it also creates a pull-through for them because you have to buy Bio-Rad consumables to generate a result with our technology. There's this really tight yoke that brings us both together at that point of sale. I'd say we're both motivated to figure out that relationship. It just hasn't been solved yet. Okay. A major transplant center recently reported their experience comparing GraftAssure to a popular competitor that uses NGS. Can you talk about what they saw when they did that comparison, which was independent of Insight, obviously, what they've said about their willingness to transition to in-house testing with GraftAssure? Yeah, man. As our Chief Science Officer, Ekkehard Schütz says, it's like once you turn it loose, you really find out what your technology can do. Tampa General got up at the Cutting Edge of Transplant Congress maybe a month or so ago, and showed a 140-patient head-to-head dataset against one of the national competitors. What they did is this is just a straight head-to-head, but they used the national competitor as truth. They just looked at the result that they got from their lab, and they said, "How often do these two things agree?" What you saw was an agreement rate well into the 90th percentile. For them, that was enough to go, we get the same result in-house that we would get if we were sending the test out, and they've started to move to bringing the test in-house. They made that announcement at the ESOT conference. I think this has opened up a lot of eyes from the collaborators that we're already working with in the United States, where they're like, "Oh, we can get the same result in-house?" There's this positive feeling like that people feel confident at this point that they can do this themselves and that there's no real magic here. It's just a very simple PCR test that basically any molecular lab can run. Yeah. Okay. Moving on to the clinical version. What you're calling GraftAssureDx is your brand name for it. You did just submit for FDA clearance in late March. What's your latest thinking in terms of when this clearance could come? I know it's hard to predict what happens with the FDA. Yeah. Gosh. I would say we've been working with the same reviewer for well over two years now. We initially went to them when, if you remember that first draft guidance that they said they were to come regulate all LDTs. We raised our hand, we said, "Okay, we'll take our LDT through the FDA." We actually got connected to our reviewer at that time. We've been connected with this reviewer throughout the process where we shifted from taking our LDT through to our kit through. We built a really nice relationship there. We feel confident that they've done their homework to understand the technology. They don't see a lot of droplet digital PCR assays. They see a lot of NGS, but they don't see a lot of what we do. They've done a lot of homework getting up to speed. That being said, there's 150-day guidance, and my experience with the government is that they don't tend to go faster than what they tell you they're going to do. They can go longer as well. I'd say until we get further into the process, I can't tell you if we're going to hit the 150 days on the nose or it's going to extend some period beyond that. We've felt really good engagement from them throughout the process. They've tended to go what we feel is above and beyond in communicating with us on what they're going to want to see, and so we're doing everything we can to meet those expectations as quickly as possible. Okay. Can you talk about the TAM for GraftAssureDx in the U.S., both in terms of kidney, I guess, because that's going to be the first indication, but then more broadly, for all the other types of organ transplants where it could conceivably be used? Yeah, I would say the TAM we put out there is about a $2 billion TAM, and that's globally. We think about the total number of tests for kidney, heart, lung, and potentially liver in that. That's a global number. Kidney's probably 50%+ of that opportunity. Of the current testing right now, you're going to see most of the remainder is going to be in heart and lung. I think for us, the regulatory clearances in the United States and Europe give us the biggest part of the market access there. I think that's where 2/3 of the market is. I'd say inside the U.S., the market's growing somewhere between 3% and 5%. Outside the U.S., we're seeing closer to a 10% annual growth rate. We certainly see the ex-U.S. market as growing very rapidly. Okay. Once you get the FDA clearance, how do you plan to launch the test and approach the centers, and how fast do you think, to get at a given clinic revenue can ramp? I think you've talked about some theoretical projections there in the past. Yeah. iMDx put out some nice guidance about a year and a half ago into sort of how we think about that ramp. I'd say for centers that don't have the instrument in-house on day one, and haven't been using it as in sort of routine clinical practice, we're thinking that there's kind of a six-month ramp in for them where they're getting comfortable with the technology. I think for the centers that are engaging on with us and part of the registry that already have instruments in-house, potentially participated in the FDA program, we expect that their adoption is going to be faster just because of the level of familiarity there. That's really the work that we're doing this year, is to drive as much familiarity in the community as we can so that we can pull that ramp rate in for as many of those centers as possible. Okay. You must know the number of transplant centers in the U.S., right? Do you have a feel for how many of them have their own labs and capabilities to do this type of test? Yeah. If you go and you pull the list, there's 254 transplant centers in the United States. About 50 of that is pediatric units that have their own kind of thing. The top 100 do about 80% of all transplant volume, so very concentrated. Among those that are at the top, you're going to find about 80%+ of those are already doing their own HLA testing, and we've seen this kind of multiple times in our research. We think that that's really kind of fertile ground for us to go out and pursue. Once you get outside the top 100, the amount of investment that's gone into doing their own molecular labs has gone down pretty significantly. We think there's probably a cut point somewhere around the top 100-120 centers, where you'll start to see more of a send-out. That's where I think the large national reference labs that don't have a test today will come in and fill that gap, because the most natural people in the world to be running this test are the Labcorps, the Quest, the BioReference Labs, the ARUPs of the world, who do all of the other transplant testing. Because they don't have an IP position, they aren't able to participate in these high-value molecular diagnostics today. Okay. Yeah. You could still conceivably get that business, but it would be through a reference lab as opposed to the transplant centers themselves. That's right. Just in terms of the different indications, I think I mentioned kidney is supposed to be first, but beyond kidney, what are the plans? What organs are next, and what's required to get there? Yeah, I'd say our next step is heart just because there's very high clinical demand here. Unlike in kidney where if you have rejection you can go back on dialysis, there's opportunities to potentially re-transplant heart. It's much more severe. If you reject the heart, you can imagine that's a big problem. We've talked to our partners here in the United States. That's where they want us to go next. That's what we were talking about as we were doing our latest funding round, is that as soon as we got done with the kidney submission, we would immediately point our attention to heart, and we intend to use the 510 pathway there, which means there's a predicate device. One of our competitors took one of their heart assays through the FDA. We plan on running a very simple head-to-head study to show that we are non-inferior, and then submit that to the FDA. Okay. How do you see the transplant diagnostics market evolving with new anti-CD38 drugs and their treatment used in transplant patients? Man, I would say the excitement that's building in transplant around these drugs is great. For 60 years-70 years now, we've been at the mercy of AMR. You've gone through all the work. You've been on the wait list for 10 years to get your kidney. You finally get it, and then your body starts to reject it, and there's really not much we can do clinically to stop that until now. I think we saw this wonderful data out of phase II for felzartamab, and we're starting to see data come out on Johnson & Johnson's drug, daratumumab. It shows these patients are responding, like it's stopping AMR. What I think happens is you're going to see a lot more pressure on screening. You're going to see a lot more pressure to catch AMR early. We did a randomized interventional study where we showed that using our technology, you could pick up AMR 10 months-11 months ahead of standard protocol. I think that kind of information is valuable because you want to get these patients on the drugs as soon as possible because it stops fibrosis because there's no way to reverse fibrosis once it's happened. That's just long-term kidney damage. It means it's going to function less well. You get the patient on drug quickly, so you really strong screening for your high-risk patients. You need to monitor them afterwards for recurrence. It starts to look like the world that's built out in oncology, where you're trying to catch a patient as early as possible, and then you monitor them very closely, in an MRD kind of environment for recurrence so that you can catch it again really quickly and intervene before the disease has a chance to progress. I think in the next, call it two to three years, the conversations that are happening in oncology around the way you manage a patient long term, it's going to start sounding a lot like that in transplant. I think we're generating the data today to support that clinical environment. We're excited to see the data release. We're going to keep our fingers crossed, along with everybody else, that the phase III goes well for felzartamab. Also see the wonderful work that's going on, bringing Johnson & Johnson's drug, daratumumab, forward in sort of an off-label way, because these patients need help, and we need to find a way to keep the kidneys in patients longer because what that does is it'll change the growth rate in the United States. The longer kidneys stay in patients, the more patients will actually have them, and the more patients can come off of the list, and so you start to grow that pool of patients again. It's a rising tide for, I would say, all technologies that are in the space. I think we are well-positioned because we have the decentralized technology to really help transplant centers integrate these new drugs into their protocol and patient management. Sure. Just from a manufacturing standpoint. Mm-hmm. Are you going to be making the kits yourselves, or is that going to be outsourced? Either way, do you have adequate capacity to meet demand? Yeah. We currently use an outsourced manufacturer, and they've performed really well for us. I think, long-term, as volumes increase, there's always that build-versus-buy conversation that goes on. We know that we could reduce the cost of our test at scale by doing it in-house. We also have to be mindful about what do we want to be great at as a company. Is it in our cards to be great manufacturers long-term? I don't know. I think maybe we'll continue to rely on outside support for that. That's easy to scale. It's a very simple PCR test. This is kind of routine bread-and-butter technology for the clinical diagnostic space. Okay. Just a few financial questions before we wrap up. Pricing, what sort of pricing do you expect to capture for GraftAssureDx for the clinical test? Yeah, nobody here publishes their list price, but what we're saying is high hundreds on the list, and then we'll discount based off of relationships and volume. Sure. I think that's how we're thinking. That gives us a lot of margin, but it also gives our customers significant margin as well. When you have a test that reimburses over $2,000, having a kit cost that's less than $1,000 still remains very financially attractive for the transplant centers. Our cost to manufacture is in the $10s. You can see there's plenty of margin to share across the system that I think will help drive adoption. Yeah, that kind of leads to my next question, the gross margin. North of 80%, is that possible? Yeah. I would say early on, probably not, because when you first hit the market, there's always some process improvement that has to happen. We do have a royalty payment that's associated with the test at this time, and so that takes 10% off the top. I would say long term, we do aim for software-like gross margins. Okay. Finally, just one on the balance sheet. How much cash do you have? I think you just put out a sort of pre-announcement or something, but if you want to talk 2025, that's fine as well. What kind of cash burn are you expecting this year? Yeah, I would say the number that we put out, I think yesterday, was just a little over $29 million in cash on the balance sheet, and we're guiding towards an average burn across the year, somewhere between $7 million and $7.5 million. That is very front-end loaded, as you might imagine. As we were pushing through the final steps on FDA, there was a lot of expense there, and then we have some residual expense that's hitting here in Q2 before things start to level off lower. Okay, got it. All right. I don't see any questions from the viewers, and I'm done with my questions, so I think we're going to have to wrap up there. Thank you so much, Josh. Really appreciate it. Yes, thank you for your time, Mike.