Biodesix, Inc. (BDSX) Q3 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Biodesix Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference maybe recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Chris Brinzey with Investor Relations. Please go ahead.

Thank you, operator and good afternoon everyone. Thank you for joining us today for a discussion of Biodesix's third quarter 2021 business highlights and financial results. Leading the call today will be Scott Hutton, Chief Executive Officer. He will be joined by Robin Harper Cowie, Chief Financial Officer. After the prepared remarks, we will open the call for Q&A. An audio recording and webcast replay for today's conference call will also be available online as detailed in the press release announcement for this call. Today, we issued a press release announcing our business highlights and financial results for the third quarter 2021. A copy of the release can be found on the Investor Relations' page of the company website. As a reminder, actual events or results may differ materially from those projected as a result of changing market trends, reduced demand, and the competitive nature of Biodesix industry. Such forward-looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's annual report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 16, 2021 as well as subsequent quarterly reports on Form 10-Q filed during 2021 if applicable. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's press release issued today and in the company's filings with the SEC. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris and welcome everyone to Biodesix third quarter 2021 earnings conference call. I'm planning to kick off with the highlights, then turn it to Robin for financials. I'll then come back with a deeper discussion of the business. Biodesix is a patient-centric mission-driven diagnostics company. Our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments. We were pleased with the third quarter performance of our four blood-based tests, making up our core lung diagnostic testing, which grew 51% year-over-year, despite traditional seasonality, including physician and patient vacations in the summer months, as well as the major hurricanes and storms and most notably the rise in the COVID Delta variant, particularly across the South, which shutdown hospitals and drastically reduced sales representative access in those areas most heavily impacted. We were also pleased with the third quarter performance in our biopharma services business, which grew 133% year-over-year. And the area is less impacted by COVID. And since the Delta variant surge began to wane in late September, we've seen encouraging trends in our sales access and performance, demonstrating the efficacy and momentum of the sales strategy. I would also like to highlight a few key milestones from the quarter that will support the growth trajectory of our lung diagnostic testing business and add to our enthusiasm and confidence as we end the year and begin looking into 2022. We had several much anticipated data announcements in the recent weeks. We announced exciting new data on Nodify XL2 in October from our prospective ORACLE clinical utility study at the 2021 CHEST annual meeting. The goal of the study was to demonstrate that incorporating this blood-based testing into the management of patients with newly detected lung nodules could modify how physicians treat patients and improve outcomes. The results were fantastic and showed that the use of Nodify XL2 was able to reduce the number of invasive procedures carried out on benign nodules by up to 67%, fulfilling the promise of the test and reinforcing data seen in the PANOPTIC study. Presenting this data at CHEST, the primary investigator, Dr. Michael Pritchett, Director of Thoracic Oncology at the CHEST center of the Carolinas at FirstHealth and past President of the Society for Advanced Bronchoscopy also acknowledged the importance of being able to provide a simple blood test that can rapidly reclassify a nodule as low-risk for the patient, providing confidence and waiting for the next CT scan and for the health system and how the Nodify test was able to help avoid an unnecessary invasive procedure. We recently announced new data at the Society for Immunotherapy of Cancer, also known as SITC on two tests. The first was our proprietary primary immune response test, which was shown to predict overall survival in non-small cell lung cancer in combination or mano immunotherapy. The second one is a test that was discovered for our biopharma partner Genentech using our proprietary Diagnostic Cortex AI platform. The test, which is known in the research world as the Anti PDL1 Response Test, or ART, was predictive of outcomes following treatment with one of our pharma partners immunotherapies. In addition to the clinical validation data, we also presented the results of our unique AI methodology called Exact Shapley values, which identified the relative importance of the specific inputs to the test, revealing different patterns and potentially different biologies that are responsible for subgroup responses to the drug. This is a critical advancement in AI explainability, providing much needed transparency and facilitating a deeper dive into the mechanisms of the disease. We are utilizing this AI advancement with our own pipeline to further explore our greater than 150,000 data in sample biobank and with our pharma partners, as demonstrated by this work with Genentech. Finally, we received approval of our 72-hour blood-based NGS test from the New York State Department of Health, a key regulatory milestone for commercialization of this new NGS test. We've made this test available to a targeted group of physicians as part of an early access program and expect full commercial launch in the first quarter of next year. The addition of the NGS test increases our core lung blood-based diagnostic testing menu to five tests. And most importantly, it gives our sales team an even broader portfolio of blood-based tests that provide multiple actionable insights for the same patient at various points in their continuum of care. Now, let me turn it over to Robin to review the third quarter financial performance. Robin?

Thank you, Scott. Our third quarter core lung diagnostic testing revenue was $4.5 million versus $3.0 million for the third quarter 2020, reflecting a 51% growth rate. As Scott mentioned, the Delta variant of COVID negatively impacted the South, and that geography also accounts for a disproportionate amount of the lung cancer cases in the United States. In the most impacted areas, elective procedures, such as biopsies and other non-essential patient visits were significantly reduced or even halted. Despite this, the Delta surge impact across the South only resulted in a 5% decline in lung diagnostic revenue over the second quarter of 2021. In areas with less severe COVID impact, we saw excellent growth third quarter over second quarter, demonstrating the effectiveness of the sales strategy and approach. Turning to biopharma services. Third quarter 2021 revenue was $1.5 million compared to $0.6 million in the year ago quarter. As we've said, this business can fluctuate due to several factors, including contract timing, which can be long under normal circumstances. But in this particular instance, reflect the continued impact the pandemic has had on overall clinical trial enrollment. COVID testing revenue of $0.5 million in the third quarter versus $5.5 million in the year ago quarter represented a decline of 91% and was consistent with the declining trend we anticipated and discussed in previous quarters, resulting from the increased rate of penetration of vaccines in the U.S. and the shift away from lab based testing towards point-of-care rapid antigen, and at-home testing. At this point, we are not forecasting COVID-19 testing services to represent a material component of our overall revenue going forward. Other results, total revenue for the quarter was $6.5 million compared to $9.2 million for the third quarter of 2020, representing a decrease driven entirely by the year-over-year change in COVID testing and partially offset by the increased revenue in our higher margin product areas. Gross margin percentage in the third quarter 2021 was 58%, flat to the same period in 2020 and a substantial improvement compared to the 40% gross margin in the second quarter of 2021. The 1,800 basis point improvement in gross margin over the second quarter was primarily a result from the mix and sales to our higher margin products of our core lung diagnostic testing and biopharmaceutical services offset by the sequential decline in COVID-19 revenue. As this mix shift to higher margin products is expected to continue, we anticipate strong margin improvement for the remainder of 2021 and into 2022. Overall, operating expenses, excluding direct costs and expenses were $16.9 million in the third quarter 2021 compared to $11.5 million for the same period of 2020 and $15.4 million for the second quarter of 2021. The year-over-year increase was primarily driven by non-cash stock compensation increases as a result of becoming a publicly traded company and investments in the expansion of our Salesforce, as well as research and development and clinical trials. The net loss for the third quarter of 2021 was $11.5 million compared to a net loss of $8.8 million for the third quarter of 2020 and $11.4 million for the second quarter of 2021. Net loss includes non-cash expense related to contingent consideration and stock-based compensation of $2.4 million recognized during the third quarter of 2021 compared to income of $0.1 million and expense of $1.5 million in the third quarter 2020 and second quarter of 2021, respectively. In addition, during the third quarter of 2021, we recognize the gain of $3.1 million associated with the extinguishment of our Paycheck Protection Program loan, which was forgiven and full by the small business administration in August. Finally, turning to our current liquidity. We ended the quarter with $47.9 million in cash and cash equivalents, a decrease of approximately $8.4 million from the second quarter of 2021, primarily as a result of ongoing operational activities. As disclosed in our filing, we are planning to raise additional capital to support our ongoing growth plans. Looking forward, due to the rapidly evolving nature of the pandemic, including variants, vaccinations, and the resulting impact on healthcare in the U.S., we are not providing revenue or earnings guidance at this time. We do, however, expect year-over-year revenue growth in our core lung diagnostic testing with our gross margin percentage continuing to improve as lower margin COVID-19 testing service revenue is replaced with higher margin lung diagnostic testing revenue. While we expect to increase our overall operating costs during 2021 over 2020 due to the execution of our growth strategy and investments in bringing new products to market, we are maintaining a disciplined focus on cost and are continuing to evolve our offering with the near-term full commercial launch of our new NGS test. Now, I will turn the call back to Scott.

Thank you, Robin. I want to reiterate that our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments. We achieve this mission by integrating Biodesix molecular tests into physician practices, providing all of the testing needs for a lung patient through their continuum of care. One patient, one trusted company, multiple tests, personalized results. We continue to build and grow our company for both near and long-term sustainable growth by investing in our sales infrastructure, as we remain on track to double the size of our direct and dedicated Salesforce in 2021. We expect to continue to expand the sales team in 2022, as we've previously discussed. The expanded Salesforce will better allow us to reach more physicians to provide them with a five-test portfolio in 2022, expanding to seven tests in 2023 to manage their patients from pre-diagnosis of lung cancer, through treatment guidance and monitoring of their disease. Our test results aid the physician in making more informed decisions to direct the right patients onto biopsy or surgery, help many more avoid unnecessary interventions and help guide treatment decisions once a diagnosis of cancer is made. Selling during the pandemic has been complex with many starts and stops as various geographic areas are hit harder than others. Hospitals are shutdown to anything but COVID and emergencies, and physicians and staff themselves have come down with COVID. In areas not as impacted by these headwinds, our sales reps are experiencing success and spreading the word about Biodesix our test and the impact they can have on patients resulting in adoption of our test. Even with the overall headwinds, the month of October showed the resiliency of our team and the impact of our test results as we experienced strong month-over-month growth in our nodule management test. We are also very pleased with the progress being made by our 2021 new sales teammates. They are on average demonstrating month-over-month growth and are paying for themselves in four to six months, right on target. Also helping our commercial team is the growing body of evidence demonstrating the utility and value of our commercial test. I already mentioned the compelling data presented on the ORACLE study announced at CHEST. Beyond ORACLE, we have multiple studies ongoing, including three additional prospective studies currently underway. The INSIGHT study with over 4,000 patients enrolled, which continues to measure the impact and utility of the VeriStrat test. The ALTITUDE registry study evaluating the efficacy and utility of the Nodify XL2 and Nodify CDT test and the BEACON-Lung study evaluating the efficacy and utility of our primary immune response test. We expect to report results from these studies among others at major scientific meetings in 2022 and 2023. These studies and results like the ones recently seen in the ORACLE study represent a key component to our business and important milestones that we believe can drive both clinical adoption and reimbursement in our core lung diagnostic testing business. Turning to our pipeline. We're pleased with the recent targeted commercial launch of our new blood-based liquid biopsy next-generation sequencing test and look forward to the upcoming broad commercial launch in the first quarter. The test was shown in a recent publication to have an unprecedented 72-hour turnaround time, which is significantly faster than the seven to 14 days it takes for other NGS tests on the market. Again, time to treatment for patients with cancer is critical, and we strive to provide reliable blood-based test as quickly as possible to support physicians and their patients. The NGS test compliment the 36-hour GeneStrat ddPCR genomic and VeriStrat proteomic test currently offered with the expanded coverage of broader molecular markers. The test are used at different points in the patient's continuum of care and provide a more complete testing solution to the physician for the care of their lung cancer patients. On the biopharma services front, we increased our number of biopharma contracts and the dollars under contract, including near-term retrospective studies that will be conducted over the coming quarters and long-term prospective studies that we conducted and recognized over the coming years as our partners enroll patients in these studies. Overall, prospective trials and our biopharmaceutical activities in this area are robust and we remain confident that we'll continue to see further growth in the coming quarters. Of note, we are seeing exciting interest in our AI and technology offerings, particularly as proteomics gain visibility as a highly valuable measure of a patient's biology. Our recent advancements in making AI more transparent, not only will provide clarity to physicians, but also has the ability to help identify key biologic mechanisms, driving outcomes for patient subgroups that may require different treatments than before. We look forward to continuing this important work, both internally with our sample biobank and externally with our biopharma partners. The takeaway, I hope it's clear. We continue to develop our clinical data packages for our on-market products, pipeline products, biopharma partners, and new AI and technological advancements. As regions of the country recover and patients begin going back for follow-up visits, we expect our resilient and highly functioning sales team to be able to reach more and more physicians to help patients and drive both near-term and long-term growth for the company. Lastly, I want to close with a thank you to all Biodesix teammates, whose efforts, commitment, and daily contributions, make it possible to achieve our ambitious mission to help improve the lives of patients, while lowering healthcare costs. With that, I'll turn the call over for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Tejas Savant with Morgan Stanley. Your line is open. Please go ahead.

Hi. This is Yuko on the call for Tejas. Thank you for taking our questions. Could you elaborate on what you're seeing on the COVID testing side and the -- testing side of the business in the quarter with some COVID testing providers seeing increases in testing volume and 3Q as COVID cases increased. And then following up on that, on the pulmonology business, how has patient visits trended over the last quarter in addition to physician office access versus pre-pandemic levels?

Yeah. Great questions, Yuko. Nice to hear from you. On the COVID front, as we've said earlier, we are continuing to project an overall decrease in COVID testing through the year. While we're not managing our business solely on COVID revenue, we do stand ready to help our partners when testing needs present. We all know and are sitting back waiting for the OSHA requirements to kick-in. And so, we feel confident that at the beginning of the year, we'll be able to engage and support certain companies and businesses and universities needs. But again, that is not our long-term priority. We're going to continue to focus on recovering from the pandemic coming out of it strong and focusing on who we are at our core. Regarding pulmonologist, obviously access varies broadly across the country and site-by-site. Some practices are continuing to be impacted by COVID, while others are in a varying process of recovery. Not many have gone back to operating at a 100% or what was pre or prior to pandemic levels. Local surges and associated restrictions definitely have reduced access to physicians, but we've seen strong performance in the second half of the year. It definitely gives us a sense and a confidence that we're getting more comfortable working through restrictions and exposures. We know from our engagement with pulmonologists, they're focused on treating those patients, especially knowing that lung cancer is still the deadliest of all cancers that time matters. These physicians know that they've got to get to those patients sooner, as we all know earlier detection and diagnosis of cancer gives us a higher likelihood of a positive outcome.

Great. Thank you for that color. And then maybe following up with a question for Robin, how should we think about OpEx trends going forward and into 2022 with upcoming new product launches and Salesforce expansion underway?

Good morning, Yuko. Nice to hear from you. I would -- our plans for the Salesforce expansion in 2022 are very similar to this year. So, continuing to add about six a quarter as we go throughout the year. So, I would expect to see increases in the sales and marketing side of the business that looks quite similar to what we did here in 2021. We also have multiple ongoing clinical studies, so we would expect some additional research and development dollars as well. But the majority of the OpEx increasingly driven by sales and marketing.

Great. Thank you so much.

Thank you. And our next question comes from the line of Brian Weinstein of William Blair. Your line is open. Please go ahead.

Hey, good morning guys. Thanks for taking the questions. So, I thought we could just start out with amongst the four tests that you have, the fifth one just being launched here. Can you just give us any idea -- I know you don't give specific numbers by tests, but just give us an idea about how each individual test is performing. What's the kind of general trends look like kind of by test and if CDT and XL2 are constantly being ordered together?

Yeah. Good morning, Brian. Great to hear from you. Yeah. As you know, we categorize our test into a kind of lung nodule management and treatment guidance. Lung nodule management is comprised of the Nodify CDT and Nodify XL2 tests. Those are the two most recent commercial launches that we've made. And those really are as expected are our growth drivers. What we've seen throughout the pandemic is tremendous interests. And as physicians work through some of the impacts of the pandemic, they really are adopting both tests to your question, Brian, how they work in concert. And so, physicians will order the CDT test. First, if that patient comes back likely malignant, there is no need for us to run the XL2 test. And so, we are seeing a number of those scenarios. And then the opposite would be a physician that would order both similarly a CDT result comes back as not likely malignant. Then we would run the XL2 tests. We're really pleased and seen a significant adoption of both at the same time, really allowing us to give physicians the intelligence they need as to competently pushing those that are not likely malignant to a wait and watch approach that supported with CT surveillance. And maybe importantly, especially during the pandemic where we know that cancer diagnoses have fallen behind, a positive CDT result really allows us to pull those patients forward, allowing physicians to know with a high level of competence that they need to intervene. So, those are our two growth drivers. We really are excited about their performance throughout the year. We're pleased again with interest, traction and adoption, and we're really excited Brian to share the CHEST data. I think when you boil it down and you say we've got a real-world study that shows that that Nodify XL2 is reducing the number of invasive procedures on a benign nodules by 67%. That's impactful. On the treatment guidance front with GeneStrat and VeriStrat, we'll be adding obviously the NGS test to this category. We've seen more challenges based upon the pandemic. As we all know, physicians early on told patients to stay away to keep themselves healthy. They closed down clinics. The majority of the patients they told to stay away and stay healthy would have been those that fit into the immunocompromised category, which also would have included those, with a cancer diagnosis. So not only have we seen continued restrictions there and limitations, we've also seen that impact some of the clinical trials, especially on the biopharma front. But we're really pleased in the recent weeks and months that we've seen rebound there. And we think that adding the NGS test will only bolster that.

Great. Thank you for the color on that. I'm curious when thinking about the Salesforce, you've doubled the numbers here, Robin just talked about adding six a quarter into 2022. I'm curious kind of what is typical sales calls starting to look like for the sales reps? Are we advancing beyond, hey, this is the offerings that are out there. Let me educate you on those to really going to the next level and being able to have deeper conversations, or is there still a fair amount of more or less high-level education that's going on? So, maybe you can spend a little time just talking about kind of what the Salesforce is most typically doing when calling on a clinician at this point and how that's changing?

Yeah. Thanks Brian. It's a really good question. And obviously given the challenges of the pandemic, the insights change on a weekly basis, what we've seen is physicians are much more capable of staying open and treating patients and working through the pandemic, especially in comparison to how things were early in 2020 with the pandemic. That resilience really has allowed physician offices to continue to engage with sales professionals. So, our sales professionals, for the most part, have access to physicians. And to your question and your point, the dialogue has changed. If you recall, early in 2020 and then late in 2019 when we introduced both Nodify CDT and Nodify XL2, there was a lot of education, bringing physicians up to speed on a new test that was coming out, sharing all the clinical data we have. Now, when you look we're able to go back in and provide additional data. So, we're growing on that. And so, the CHEST data really allowed us to do that, where we can go back into positions and state, hey, look, we've got a building body of evidence. We've been able to show in a real world setting that we've reduced invasive procedures by 67%. We're not resting on that. We're going to continue to invest in clinical studies. And we think data is the only way to support physicians as they go out and present to physicians. We've also seen physicians start to reach out to us. So, when you think of that unsolicited outreach, that starts to be an indicator of awareness. And so, for us, coming out of the pandemic, we're pleased. We have a number of physicians in the past few weeks and months that have reached out, they've become aware of the test. They're seeing some of the presentations and publications. So, when it comes to access, we can't state -- the physicians' offices are open every single day. Obviously, we have to work with them. We have to continue to be transparent. But when they are open, we're conducting in-person meetings. And when they're not open, we don't stop. We've really adapted new sales methodology that supports us continuing to meet physician needs even while working remotely.

Great. Thank you for that. And then the last one I had was on the biopharma side. You guys talked about some improvements there. I don't think you've ever quantified it, but can you give us some idea qualitatively or quantitatively about what that backlog of business with biopharma looks like at this point and how that's growing? Thanks guys.

Yeah. Thank you, Brian. As everybody may know, we provide a variety of services in our business development, biopharma services business. That includes retrospective studies, prospective studies. The question is a complex one. As we know, retrospective studies are back on track coming out of the pandemic. Yes, prospective studies have been a little bit slow to recover. We've seen good recovery in the recent weeks and months, and we're starting to see a higher enrollment rates. So that's encouraging. When we think broadly, this is a business that relies on us providing a service to biopharma partners. So, we spend a lot of time focusing on, are those clinical trials on the biopharma front are they open? Are they enrolling? Are they of a global nature? Are they U.S. based? So the answers to those, give us the insights to better appreciate what the future looks like. What we're able to share is, and we're excited to share this, Brian, we we've seen broader interest. So, the number of contracts is increasing. The number of dollars under contract are increasing, and our ability to forecast over a two to three-year period is we're gaining confidence there. As you know, it's going to be a lumpy business. So, the more dollars we have under contract, the more samples we're receiving, the higher -- the likelihood that we're able to forecast with a high level of confidence. So, we're excited there. I think on the biopharma front, we really are starting to see a significant recovery, which also gives us confidence on our commercial business, knowing that if biopharmaceutical companies are able to enroll patients in studies, then our physicians should be able to see and treat patients face-to-face.

Great. Thank you guys so much. I appreciate it.

Yeah. Thanks Brian.

Thank you. And our next question comes from the line of Kyle Mikson with Canaccord Genuity. Your line is open. Please go ahead.

Thanks. Hi, Scott and Robin. Thanks for the questions. So appreciate that COVID has been -- it had an adverse impact on the cost of the core business recently and in nurture, obviously just -- it sounds like trends are improving, as you said, which is encouraging. I'm just wondering if you kind of anticipate any kind of long-term impact on the kind of end market here the pulmonologist as it relates to ordering your tests or just the overall behavior, I guess. I'm just curious if there's any reason you would maybe modify the way you were previously thinking about marketing and kind of selling your tests going forward. That'd be interesting to hear. Thanks.

Yeah. Thanks Kyle. Great question. For us, as we partner with physicians, what we hear is, and it's not a surprise to anybody. They've worked long. They've worked significant number of hours, days and weeks throughout the pandemic. They're on the front lines. They're tired. They're fatigued. But as we hear that and we see broader utility of our test, what we think is that physicians are more motivated to get back to treating those patients, that they were pre-COVID. They also know that time is of the essence. So, we're not seeing anything, Kyle, that would have us concerned that physicians are going to treat or see those patients differently. We still think that the broad clinical utility of our test and the insights we're providing supported with the data we're developing. We think it sends a really strong message about how these tests can be incorporated into their practice to make them more efficient, make them more effective, and ultimately highlight the patients that they need to pull forward and see, and treat as soon as possible. Again, we all know when you're dealing with the deadliest of all cancers with lung cancer, early detection and diagnosis definitely has an impact on long-term outcomes. So, the utilization of Nodify CDT and XL2 to help identify those patients that they need to prioritize, it really is resonating with those physicians. We only think that, that gets stronger as we continue to build data. If, and when there are changes in how physicians treat and see patients, we're going to be ready and waiting to support them. I think what we've demonstrated as a team at Biodesix is not only that we're adaptable and flexible, but we're going to be resilient and creative. And we're going to find a way to meet their needs as a patient-centric mission-driven company, we must do that.

Great. Okay. That was great Scott. Thanks so much. And I guess just turning to the NGS panel, great to see that's kind of like on track and everything early access, sounds like they'd launch in November. But just given the challenges that you were just kind of testifying in the last line of questioning on the treatment guidance side of the business, I guess, what are you doing to ensure that test kind of hits the ground running, doesn't come to any challenges in the environment.

Yeah. I think the key part there, Kyle, is what we can control. Obviously, we've all been reminded that we cannot control COVID. But what we can control is how we introduce these tests. And so, really when you think about what our teams have done, we've accomplished much of the work that would be required to launch the test ahead of schedule. Again, when you look at what we've done over the last 18 months, we think we're sending a pretty strong message that we're not just going to blindly roll tests out. We really are going to exceed expectations, bring them out with the materials, the data, and the support that they need. So, our sales reps, we'll begin training them here soon. Robin and I referenced that we've got a limited rollout. And so, for us, what we're doing right now is we're going to key users that utilize our GeneStrat ddPCR tests. And we're introducing this so that we've got a whole package that's supported with VeriStrat. We are the only company with three products focused on treatment and guidance. And so, we really think that the one of the key differentiators is obviously time, our ability to return these test results faster than anybody else. That's something we take great pride in. Not just because we want to be the fastest, but we know how important time is. And so, ensuring that physicians have a patient's unique, personalized molecular test results in hands before that patient is seen. And more importantly, before a patient is prescribed a treatment, we think that's critical. And so, for us, prioritizing those that know us, that utilize our test that understand our mission and our vision, we'll roll it out to them. We'll learn as we go. Again, the one thing we can't do is really try to change what's occurring behaviorally and societally based upon the pandemic, but we're going to be there to support physicians and their broad testing needs.

Got it. Very helpful. And on the nodule management side, safe to say that the competitive landscape could be changing pretty soon. I'm just wondering what your sales team is doing to secure some of the key customers and kind of emphasizing the value of your test. And overall, how important do you think personal advantages is going to be. And also, I mean, really the established kind of clinical evidence to kind of helping you maintain and even increase market share.

Yeah. Great question, Kyle. We pride ourselves on moving fast. And so having a first move or status and advantage is something that we're really eager and excited about. But at the same time, we also know that we're creating and building a market. And so, we not only take great pride in that, but we also appreciate that we've got to do it the right way. So, for us, the right way is utilizing data. It's not just pushing tests out, let's push test out with data. And so, we fully expect that there will be competitive threats that will come our way, but knowing that we've got a two plus and maybe even a three-year headstart an advantage, when those companies and technologies are presenting validation data, we're going to be showing two and three-year-plus real world performance. And what we've seen with the ORACLE data that we just recently shared at CHEST is not only -- is the test in a real world environment performing exactly as the validation that it would with PANOPTIC, but we're starting to see broader utility and more of an impact. And so, the ability to measure that we've reduced invasive procedures on benign nodules by 67%, we think that sets the bar pretty high. And so, for us, we're not going to just stand there and say, hey, we want to compete head-to-head. We want the data to speak for itself. We want physicians to choose based upon the test that performs best and enables them to make the right decisions for each and every patient.

Okay. Great to hear. Let me just kind of squeeze one last one in here before I have off. So, on biopharma, nice to see the strong performance in the quarter, and also appreciate the kind of color on the back audit -- I guess the pipeline I'm going forward. I just was wondering if this, $1.5 billion number, so it could be like a run rate or could it step up in 2022 in that? And also, just in terms of the backlog, like how does the competition really look in terms of diversified sources of revenue on that business? So, I noticed that one partner in particular had pretty large portion of revenue in this quarter. So, I was just curious what that looks like going forward. Thanks.

Yeah. Great question, Kyle. As we build that book of business, for us, the ideal biopharma partner is somebody who starts early, right? So, if you start to think Phase 1, Phase 2 trials, they allow us to partner with them to provide critical insights on performance of the drug. What you see there as those contracts and sample sizes are usually a little bit smaller. And then as you move through the development process, that's where you start to see deeper, broader contracts and inclusion larger samples. And so, we don't see it as a bad thing to have one or two partners that are inordinately providing revenue opportunities and test samples for us. We actually see that as assigned to show that we've worked with them for a long period of time. We've shown utility and value, and they're including us in the development process. We think that also then builds confidence in some of the newer biopharmaceutical partners that we're engaging and also shows them a roadmap for how we can contribute and provide value for them. So, for us, it's a blend, right? The ideal opportunity would be a companion diagnostic. We know that everybody talks about that, but we also see great value in partnering biopharmaceutical companies to give them insights early. We think that's what makes us a trusted partner. And again, it really all comes back to the data.

Yeah. Okay. Really helpful, Scott. Thanks so much for taking the questions.

Yeah. Thanks Kyle.

Thank you. [Operator Instructions] And our next question comes from the line of Sung Ji Nam with BTIG. Your line is open. Please go ahead.

Hi. Thanks for taking the questions, and congrats on the quarter and the progress you're making. Just a couple of clarification questions and then a follow-up. So for the Biodesix anti PD-L1 response test, the ART, is that solely for Genentech use, or are there opportunities to further deploy that beyond kind of what Genentech is doing?

Yeah. Great question. We're really proud of that work. When we build off of Kyle's question, when we partner with biopharmaceutical companies that there may be varying abilities to offer tests and insights. The key thing for us is, is we gain access to those insights and we can build off of that. So, what we've done over the years is continue to build a body of evidence that supported with our introduction in 2023 of our primary immune response test. And so, you could see a scenario where -- and these would be hypothetical, but a biopharmaceutical company would partner with us and pursue their own test. And then at the same time, we have the ability not based upon that data, but different sample sets to create a different test. When it comes to immunotherapy insights, I definitely feel that there's going to be a number of different companies and partners focused on providing those insights. So, can't provide great color on exactly what Genentech's interest is, but again, we're going to be ready and in the wings to support them with any interests they may have, and we're going to continue to double down and focus on our primary immune response test. We know that that test can positively impact a patient's lives and their outcomes.

Got it. Okay. Great. And then just another question on biopharma services. For the fourth quarter, do you guys have visibility into what that could look like? Do you anticipate kind of a step-up in terms of -- from a revenue recognition standpoint, we just love any color there that you might have.

Yeah. Thanks Sung Ji. We do believe that that business will continue to grow and scale. The big question mark for us is really watching what's occurring with the pandemic globally. We know that much of our biopharmaceutical partners perform clinical trials on a global basis. And so, even seeing some of the recent trends, some positive, some negative we're going to monitor and watch that closely, that would be what would impact us most, would just be access to enrolling patients in those studies. Similarly, a number of the biopharmaceutical companies obviously have locations around the globe. What we've seen is when there are spikes and they shutdown offices, it may limit access to retrospective samples. So, you can see how the business can be impacted as the pandemic continues to really rage. So, we'll watch closely, but all the things that are in our control, we've put ourselves in a position to continue to grow and scale. We just need to be mindful that we still are in a global pandemic.

Got it. And then lastly for me, congrats on launching the 72-hour NGS test earlier than expected. Just curious -- we'd love to hear any kind of early feedback you're getting. And then also, are you selling this through your oncology channel mostly? And as we think about how you might roll this out, broadly next year, how should -- how are you planning on kind of leveraging your existing Salesforce, your Salesforce expansion strategy kind of in the pulmonology market and leveraging that and given that this is largely -- I'm assuming it's largely going to the oncology channels. So, how should we think about your sales and marketing expansion strategies there going forward, if you will?

Yeah. Thanks Sung Ji. Great question. We'll plan on the next earnings call to really lay out how we're going to fully introduce and commercialize the NGS test in the beginning of next year. As I mentioned, we have slowly begun rolling it out. We are receiving feedback. And to your question, what kind of feedback are we receiving? First and foremost is time. Our ability to turn these test results in 72 hours is a real game changer. And we're receiving that feedback. Secondarily, our test results form, right? We're not turning a book back over to physicians and asking them to find out what matters. We really are handing them a kind of a personalized test results form that matters to them, gives them the insights that they're looking for to better enable them to consistently treat those patients. And then from a sales perspective, yes, our entire Salesforce will have access to sell and support this test. We think that it'll be a concerted effort across different medical specialties. Early on, -- like I said, we're going to roll the tests out to those that know us, those that are comfortable ordering with us and receiving our test results. We'll take those insights that we gain in the coming weeks and we'll adapt based upon that. But what we do know is that pulmonologists are ordering, especially in fully integrated practices, they're ordering more and more molecular tests on a monthly and quarterly basis when considering what they've done historically. And a lot of that is -- so that the oncologist in that integrated practice has those tests results in hand upon first oncology visit. And so, for us, it's a balanced approach and strategy. But we'll -- we're continuing to build out not only our Salesforce, but really our medical affairs team, that'll be supported with a tremendously talented and capable medical science liaison.

Great. Thank you so much.

Thank you, Sung Ji.

Thank you. This does conclude today's question-and-answer session. Ladies and gentlemen, this also does conclude today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.