CareDx, Inc (CDNA) Q2 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the CareDx, Inc. Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian Cooney, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended June 30, 2021. The release is currently available on the company's website at www.caredx.com. Reg Seeto, President and Chief Executive Officer; and Ankur Dhingra, Chief Financial Officer; will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, expectations regarding coverage decisions, pricing and enrollment matters and our future financial expectations and results are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, July 29, 2021. CareDx disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections or other forward-looking statements, whether because of new information, future events or otherwise. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release filed with the SEC. I will now turn the call over to Reg.

Thanks, Ian, and welcome to CareDx. Good afternoon, everyone, and thank you for joining us for CareDx's second quarter 2021 earnings conference call. Today, I'll focus on five key highlights from the quarter: the first is our record revenue growth driven by testing services; the second is expanding our leadership across new organ areas; the third is continued leadership with innovation from both our internal pipeline and from external partnerships; the fourth is building on our 2021 theme of connecting the patient as part of the patient journey; the fifth is to highlight our excellent financial position and the increase of our full year guidance to be covered by Ankur. On the first topic, we had another stellar quarter of growth. Our record 77% growth in total revenue from last year ago quarter was driven by new volume hires of outpatient testing services. Our sustained success is because we focus on bringing leading innovation to mainly improve the outcomes of transplant patients. Our 100% focus on the transplant patient over 2 decades has led many to consider and to call us the transplant company. As part of this, I want to thank each and every one of the CareDx team in delivering on our vision on being the leader -- leading partner in transplantation. For the second quarter results, total revenue was $74.2 million, increasing 77% compared to the year ago quarter. The main driver of growth in the quarter was from our testing services revenue, which increased 79% to $64.9 million. In addition, revenue from our products business increased 108% to $6.9 million and digital and other revenues contributed $2.4 million to the top line. I'd like to highlight the global products business was in launch mode at the start of the pandemic. The H1 2021 performance is a reflection of improved conditions ex-U.S. as well as the strong demand for NGS products that we deliver. The products team is excited to be in launch mode again. In the second quarter, CareDx provided 37,400 AlloSure and AlloMap test results to transplant patients, growing 109% from the second quarter of 2020. Approximately 6,600 of these tests were part of HeartCare. Our comprehensive gene expression and donor-derived cell-free DNA assessment of graft rejection. As of the end of June, more than 295 kidney centers and community practices and greater than 120 heart centers were using our offerings. Notably, more than 65 kidney transplant centers in the United States have now adopted an AlloSure testing protocol. Our direct to center approach remains core to our strategy, where we are focused on building the moat through an expanded portfolio of offerings within the transplant centers and by increasing the number of AlloSure testing protocols. We've also started to replicate our unique service model in building our community nephrology presence. In this way, our team could be more effective in connecting transplant patients and the community nephrologists once their care has been transferred from the transplant setup. We're uniquely positioned to play the role of connecting the patient, especially as we take a long term focus on a transplant patient journey. During Q2, we continue to expand on our leadership through multi-modal innovation to new areas. In liver, we announced enrollment of a first patient in the MAPLE study. MAPLE is a 1,500 patient multi-center prospective study using our multi-modality approach to assess the status of liver allografts. For lung, we are very excited by AlloSure Lung as new innovation for lung transplant patients, especially as 50% of allografts fail within 5 years. Our submission is under technical review by MolDx as part of the new LCD process. As previously mentioned, we had submitted our AlloSure lung in the middle of last year. In support of driving record growth and leadership, we are hyper-focused on leading with innovation and scientific data generation. At the two largest transplant conferences in 2021, ISHLT and ATC, our testing services offerings and innovative pipeline were the focus of more than 65 scientific abstracts. It takes an incredible commitment to build such a significant body of clinical data, especially in diagnostic space. Again, this has only been possible because we're 100% focused on transplant and the transplant patient. The key highlight from the ATC conference was the announcement of KOAR-1000, the analysis of our 1-year data from the first 1,000 patients enrolled in the KOAR Study. This prospective study included more than 50 transplant centers and was designed to evaluate the safety and efficacy outcomes in kidney transplant recipients whose post-transplant care is managed using AlloSure. The noteworthy findings from the first 2,000 patients were one new graft survival among patients monitored with AlloSure was higher than those of patients reporting a national UNOS Registry Data. AlloSure use in patient management significantly reduces the number of biopsies performed as compared to biopsies guided by serum creatinine and AlloSure discriminates rejection from no rejection in both routine surveillance and for-cause groups. We're also delivering innovation in the stem cell and cell therapy space. These are substantial longer-term opportunities that we are executing against. With our proven track record to understand patient needs, clinician preferences and the center workflow, we're able to develop these testing solutions by leveraging our broad technological capabilities. We recently announced the launch of AlloHeme in the ACROBAT study, introducing our latest innovation in testing services to stem cell transplant patients. In driving test innovation, we also continue to support the broader ecosystem by investing in and acquiring or partnering with innovative companies. For example, in May, we announced an investment in Miromatrix, a life sciences company, pioneering a novel technology for bioengineering, fully transplantable human organs. With close to 120,000 people in the U.S. on the waitlist and only 40,000 available organs per year, we believe in investing in companies addressing organ availability through novel innovations. In June, we augmented our pipeline with OrganX through a strategic agreement, which will develop advanced analytics and AI to integrate AlloSure data with large transplant databases to provide clinical data solutions. We've also shared that for 2021, our key theme is connecting the patients as part of the transplant patient journey. We recognized early on the strategic value of patient care managers and have now added digital platforms to strengthen this patient interaction. We've also expanded the availability of our AlloCare app to Android platforms. Today, we have an easy to use mobile app designed to help organ transplant patients manage their medications, schedule lab appointments and view their test results. This app will be augmented by acquisition of Transplant Hero, a mobile application provider of novel cloud-based medication management solutions for patients. As we continue to connect the transplant patient, we now manage more than 29,000 referrals from dialysis practices to the transplant centers and more than 7,000 patients on the waitlist at centers. We have also more than 9,000 patients that have signed up for RemoTraC. Before turning the call over to Ankur to discuss our financials, I'd like to say how pleased I am to have Dr. Hannah Valantine join our Board. Dr. Valantine is Professor of Medicine at Stanford and former Chief Scientific Officer For Scientific Workforce Diversity at the National Health Institutes, NIH. We're excited to have Dr.Valantine join our Board, and we all look forward to working with her and learning from her. Now handing over to Ankur.

Thank you, Reg. I'm very pleased with the business performance and our financial results for the second quarter of fiscal year 2021. Let me provide you more details. Turning first to the income statement. Our second quarter revenues grew 77% on year-over-year basis to record $74 million. We see continued very strong adoption for our testing services and products. Testing services revenues grew 80 -- 79% year-over-year to $65 million for the quarter, driven by strong volume growth in both kidney and heart patient results. Product revenues increased 108% year-over-year to $6.9 million, driven by strong demand for our NGS products across all three regions. Digital business revenues were $2.4 million, growing 10% year-over-year. Moving to gross margins. For the second quarter of 2021, the gross margins was 68% compared to a gross margin of 64% in the same period of 2020. The non-GAAP gross margin for the quarter was 70% compared to 68% in the prior year's second quarter. We are driving productivity and efficiency in our lab operations. At the same time, we are also investing to scale our capacity for higher volumes, both for current services for heart and kidney patients and also for upcoming new services. Operating expenses for the quarter were $55 million. We continue to invest in R&D pipeline, both in development of new services for transplant patients and also clinical trials to provide data on clinical outcomes. As Reg mentioned, we recently reported long term data for our KOAR Study, demonstrating the long term benefits for kidney patients. Similarly, we continue to build our commercial capabilities across multiple organs and also across the patient transplant journey. For the second quarter, net loss was $1.9 million compared to a net loss of $6.6 million in the same period last year. Our net loss per share was $0.04 for the quarter compared to a net loss per share of $0.15 in the second quarter of last year. Non-GAAP net income for the quarter was $5.9 million compared to a non-GAAP net income of $1.7 million in the same period last year. Our basic and diluted non-GAAP net income per share in the second quarter of 2021 was $0.11 compared to a basic and diluted non-GAAP net income of $0.04 in the same period last year. As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization and other expenses. For the second quarter of 2021, we recorded positive adjusted EBITDA of $6.8 million or 9% of revenue compared to an adjusted EBITDA loss of $2.8 million in the second quarter last year. Cash and cash equivalents and marketable securities at June 30, 2021 was $370 million. On an operating basis, we generated record cash from operations of $9.8 million in the second quarter. On the capital deployment side, we actively deployed capital in continuing to strengthen and expand our portfolio in the transplant ecosystem. We invested in Transplant Hero to bring medication management capability to our direct to patient offerings. We invested in Miromatrix to support expansion of available organs for transplant. And we partnered with OrganX to develop advanced analytics aimed at transplant patient journey. Turning to guidance. We are updating our 2021 revenue expectations to reflect our second quarter results and the continued strong demand for our testing services in the United States. As of today, we anticipate $280 million to $290 million in revenue for the year. Our guidance balances the ongoing uncertainty around COVID variance and includes continued market penetration of our products and services. We see great demand for our services and continuation of very positive response from patients. As the transplant partner of choice, we have a tremendous opportunity in front of us to provide innovative clinical and digital offerings across the patient transplant journey. We remain focused on realizing that opportunity. With that, I'll open the call for questions.

[Operator Instructions] Our first question comes from Andrew Cooper with Raymond James.

I guess, maybe first, can you give us an update on the attachment rate for HeartCare with -- for AlloSure Heart with AlloMap? And any kind of updates on conversations with the commercial payers and what that trajectory could look like as we think about the 6,600 tests getting paid from here forward?

Yes. Thanks, Andrew. I'll take the first question, I'll let Ankur talk about about the coverage. But yes, the attachment rate is about 85%. I think in the last quarter, we talked about between 80% and 85%. And what we've seen is this incredible unmet need with the clinical utility of this multi-modality approach. And we're really excited and so proud to be the first and only company to achieve this. And I think with that, we truly see some real clinical benefits, obviously, evidenced by the rapid attachment. So Ankur, do you want to comment a bit on the commercial coverage?

Yes. A general ongoing update on the coverage. So we continue with our discussions with the commercial payers. We did get some -- little bit additional covered lives across some of our portfolio in AlloSure. And -- but as such, the adoption and the coverage discussions, both are going quite well.

Okay. Great. And maybe just one on the guide. Appreciate the raise. But I guess, as I just think back to 2020, your volumes were really pretty resilient in the face of COVID with the bigger impact on the product side. So just help me think about kind of the puts and takes here when we think about the run rate we just saw in the second quarter relative to raising the guide maybe a little bit more modestly than some folks might have hoped.

Yes. Thanks for the question, Andrew. This is Ankur. So yes, we're very pleased about the overall business performance. Very pleased with the momentum here, raising the guidance at $10 million at the midpoint. The increase at the midpoint reflects the strong performance for Q2 and also includes increasing the guidance for Q3 and Q4 as well. So we're raising the back half relative to what we said last quarter. But I would also like to remind you that in the first half, in the first 2 quarters now combined, we've raised the guidance by $25 million for the year. So we're very pleased overall. We're seeing good momentum in our business, we've seen good adoption in our business. Probably some people might ask no one-time kind of performance in Q2 either. As we look forward to our guidance, our intent and the drive is to continue to drive the market penetration model. And we expect to keep driving that. Given where the COVID variants are today and where all the discussions are we felt it would only be prudent to not ignore that, given the risks that are in the environment. COVID in the past has been -- once we put pretty RemoTraC in place, was structurally beneficial for us on the testing services side. But on the product side, we did see some ramifications in the short term. We have not seen anything like that right now, but we felt it would be prudent to not ignore the discussions that are happening right now.

Okay. Great. And maybe just one last one for me. Just in terms of the cash balance, it's nice to see some of it go to work when we think about Miromatrix and Transplant Hero. But are there things out there, maybe a little bit bigger in size that are attractive to you and you're considering, what does that pipeline look like? And just how do we think about use of cash given EBITDA positive again in the quarter and kind of trending towards generating more cash as opposed to necessarily needing more with a pretty clean balance sheet?

Yes. Our focus still remains on continuing to add assets within the patient transplant journey. You’ve taken – you’ve seen us take the approach over last several quarters, where we continue to add assets within the portfolio and add offerings. That approach will continue. In general, the funnel has a whole plethora of opportunities of various sizes, but our approach towards adding offerings is the approach that remains.

Our next question comes from Matt Sykes with Goldman Sachs.

Just maybe one bigger picture question. Reg, you've mentioned on past calls and on today on some of the key drivers for growth, one of which being, in the past, you talked about the community nephrology, which you're pushing into. Any update on your progress there? And then, on the second one, just on the patient journey. I appreciate all the apps and the technology that you're developing to get to the patients. Any color on sort of any metrics we can use to see the success of the engagement with patients, downloads, et cetera, things like that, that we can see are making an impact to the patient?

Yes. Thanks again, Matt. On the first one on community nephrology, it certainly has been an area of focus for us since the start of the year, and we had the team ramped up. I mean, firstly, we're well ahead of expectations. I think in the prior quarter, we shared more than 100 community nephrology centers, who are now using AlloSure and continue to see really nice growth during Q2. The key for us is really making sure that we have a long-term plan, and that will eventually involve the movement of additions to protocols, which we've seen happen during Q1 and actually Q2 in the community nephrology setting, as well as now moving to potentially some additional offerings in that space as well. So community nephrology is really this incredible point of continuation that we have. And we are in a unique position to play the role of transitioning a patient from the transplant center and when they go back to community. So really exciting and well ahead of our expectations. On the patient journey, this is really pivotal to what we do as a company. And really, every single piece is what we've been adding, whether it's from our internal pipeline or from some of the external BD partnerships and focus on this pre, peri, post-transplant journey. And I think getting that digital connection as well as now sharing some of the actual patients themselves. The 29,000 referrals, for example, from dialysis centers moving into the transplant center, and then the 7,000 of the actual -- those on the active waitlist, moving on to those who actually receive the transplant of one in three kidney patients or one in two heart transplant patients, getting our offerings and then moving on to the post-transplant journey. So as we look at that digital, and as you mentioned, the heart plays a key part of that, whether it's pre, peri or post. We've had thousands of patients download the app, it's really progressing really well. We're seeing some improved, obviously, performance measures when patients are on the app as well as using our patient care manager. So really exciting to have accelerated this type of platform during the course of the last 6 months. And we continue to see a lot of excitement, not just from the patients, but also from centers as they see what we bring as incremental offerings and value.

Reg, very helpful color. Just one more for me. Just curious, obviously, as we -- COVID is pretty unpredictable, but clearly, things seem to be going in the wrong direction. But now you've got the RemoTraC asset, this is well developed. I'd love to get an idea from you as to the utilization, I'm sure it was obviously very strong, and it's probably come down a little bit. But do you feel like you're in much better position now, obviously, with RemoTraC? And has utilization actually stayed fairly high with patients using mobile phlebotomy or will you have to see a transition back to that in case things do indeed worsen from here?

Yes. RemoTraC itself on mobile phlebotomy has been the exceptional offering that we’ve built out. And last quarter, I think we shared, it was around 40%. This quarter continues to be around 40%. So we see, even with the increased volume and growth, really strong support for the mobile business we’ve built. And the – again, as you talk about that access to the patient, this is just the beginning of how we continue to look at how we interface with this patient, where we had this direct consent. So again, really consistent with what we’ve seen in prior quarters in terms of that usage.

Our next question comes from Steven Mah with Piper Sandler.

Congrats on the quarter. So maybe a follow-up question on the attachment rate for AlloSure Heart. What do you think the max attachment rate you can get and you're approximately 85% right now?

Yes. We're above 85% at the moment. And I think to get even to this level has exceeded, I think, anyone's expectations. I mean, for us, we certainly knew there was incredible clinical utility, but I do think if you think of a multi-modal test being at this level, I think it'll be the envy of any sort of predicted or projections that one could achieve. So I mean, clearly, the upper limit is 100%, right? So I think, as we continue to have clinical utility, we'll see if we get there. But I think we're very happy with the numbers that we've just shared.

Okay. Great. And then, another follow-up question on the direct to patient strategy. Obviously, you guys have made a significant investment over the years and continue to make investments, for example, Transplant Hero. Can you point to any one of those strategies, which is maybe driving this volume growth and patient adherence? And then, a second part to that question, should we expect you guys to continue to invest in the -- into this direct to patient strategy?

Yes. I mean, firstly, it's not one single thing. I mean, the basis was -- COVID did accelerate our direct to patient strategy, which started with RemoTraC with the offering. And I think from there, we have always had our strategic patient care managers, and we're one of the first companies to realize how incredible it would be to have these folks involved in the management of these patients. And so if you think of patient care managers, then with the addition of the app, now moving on to potentially other offerings, it really has help drive an incredible adherence rate and also there's continual stickiness with what we do with our core products. So I think not one single thing, but I think it's all additive, and I think you'll see more of that. So again, we're really excited by the combination of offerings we've brought to the patient and that can only increase. I think, your second question is, are there other things that we may continue to do, and I think we'll continue to add to outpatient care offerings. What we see is an entire ecosystem out there, and we're going to continue to invest in this direct to patient journey because for us, it's so important for us to connect all the pieces from the pre, peri and post and it makes it easy being the company or the transplant company and being 100% focused on transplant. I think everyone looks up -- and looks up to us and expects us to lead the way, and that's what we've found so far.

Okay. Got it. And then just maybe a follow-up question. So on transplant Connect, yes, it looks like you've got really good growth over the last quarter, went from 20,000 peak dialysis referrals to 29,000, went from 500 dialysis centers to 830 waitlist transplant centers to 50. What's really driving that really fantastic engagement? Is it what we've talked about, or...

Yes. When we -- yes, I mean, there's been some changes in the kidney initiative. And I think, we've realized that there it involves multiple parts of that ecosystem, whether it's from OPOs or whether it's dialysis centers or whether it's community nephrologists. So I think, there's all these macro changes we're seeing. And we anticipated the impact of one of those macro changes was dialysis centers have an intent to progress patients more to -- refer patients more to transplant centers. So as part of that, we developed an offering, which we believe is the best-in-class and one that leverages what we have in terms of our EMR platforms, both with Ottr and TransChart. So what's been the attraction here is, we've created a solution to address an unmet need, which is how do you get referrals in a seamless way to the transplant centers? And secondly, how do you ensure there's an electronic wafer communication? And so really, what we're seeing is bringing something that addresses the unmet need, which we're really good at. And then two, being able to introduce that in a way that we're trusted really helps us and really has helped us bring this to market.

Okay. Great. And then the last one for me, it's on AlloHeme. Can you just confirm that that's not going to be covered under the transplant umbrella LCD? And how do you think about reimbursement for AlloHeme? And do you envision a similar sort of multi-test surveillance protocol similar to AlloSure?

Yes. So it's AlloHeme, and I think you saw the recent release we had with the ACROBAT study for the first patient enrolled for stem cell transplant, is not part of the solid organ universal LCDs. So that's the first thing. The second thing is, as we look at AlloHeme, it's being used in what we believe is the next-generation of chimerism. What the study itself is looking at is how do we measure obviously, staff -- stem cell engraftment. But what the study itself is trying to do is look at and measure relapse, which has never been done before. So I think, there are multiple different approaches to existing reimbursement or the future reimbursement. But the important thing here is we want to drive innovation and saying that as a hallmark of the company, which is what we stand out for is innovation. And so we're trying to do is the thing, which hasn't been done before, which is now providing a test they can look at and measure relapse with in this approach. So that's what we're sort of taking but yes, there are multiple avenues of options for coverage.

And just to clarify there, Steven, I think on your question around reimbursement, the current universal LCD covered solid organ transplant. So as we work through, that's certainly our expectation as AlloHeme does not get covered in that.

Yes. Yes, that's right. Yes. I just wanted to confirm that it's not covered. And do you -- and my second part of the question, do you assume that this is going to be kind of a multi-test protocol as you look for relapse? There's going to be a multi tests -- multiple tests per year or once of the year? Or can you give us a sense of the testing frequency maybe?

Yes, no, so this will be a longitudinal patient management test as well, similar to what we've done in other transplant fields. It's important to actually have that patient monitored longitudinally. We haven't yet shared on the frequency, but yes, it would be a longitudinal.

It’d be longitudinal.

Our next question comes from Brandon Couillard with Jefferies.

Reg, your sales and marketing spend in the second quarter jumped up pretty considerably sequentially. Can you just talk about the areas where you're investing most heavily? And then, Ankur, it would be great if you could share kind of an update on the OpEx outlook for the full year.

Yes, sure. So our investments, primarily, you see are sequential investments going heavily into the R&D and the sales and marketing, your question is focused more on the latter. So we've been preparing our team, especially our heart team for potentially upcoming approval for our lung launch, that has been one area where we've been investing. And then, you've heard us about continuing to work on the nephrology side of things where -- which has been another area, where we continue to invest from the kidney perspective. But if you step back after on those details, in general, developing our commercial capabilities towards a multi-organ, solid organ transplant commercial channel, that thematically is the investment within the sales and marketing direction. If you think about the direction going forward, that on the sales and marketing side will remain thematically, where we will invest more because -- and then on the R&D side as well. Under the new LCD, we have the opportunity to pull in a lot of our pipeline as we have. So we've been increasing our investments in that direction, both on the development side of things as well as on the clinical trial side of things, so that we can enrich our pipeline sooner than our original plans.

Got you. And then, Reg, and -- obviously, good progress in terms of the number of transplant centers adopting AlloSure protocols. Could you just talk about the impact to test volumes when a new center adopts. And are you able to, to some extent, sort of block out competition when you've got a new center establishing AlloSure protocols?

Yes, no, I think, for us, the gold standard is to have a center get on to protocol. It takes a real lot of effort now that the early adopters have done from the first year we're almost into year 4. To get those protocols, it has to be earned, and it comes from multiple engagements, sharing clinical data and getting clinical use experience, but also showing that you're the leading innovator in the space. And I think, certainly, once you get that name protocol -- like we don't count it unless there's the word AlloSure in it. So it would just have cell-free DNA, for example, or if a center uses a high -- a regular frequency, but it's not on protocol, we don't count that either. So we do think it's important to have this relationship, which we've built over 20 years, continue with these centers. And it's a real honor and privilege once they put us on to -- on the protocols as part of that. So yes, it's core implicit to the strategy that we've developed. And yes, we do -- there's a nice increase as consistent with the protocol once it's adopted.

Got you. Last one for me. Any update on timing for KidneyCare launch? And would it be unreasonable to look at the capture rate that you've experienced for HeartCare? And is that as a proxy for future KidneyCare rollout?

Yes. I mean, KidneyCare and multi-modality is an area that we’re truly excited by. It’s one where I think it was validated through HeartCare. And now that we’re actually doing that across all organs, KidneyCare, lung care and LiverCare. In terms of AlloMap kidney specifically, I mean, for us, we are putting the process in place, for example, we mentioned we’d have clear validation for the lab setup by the end of the year. But clearly, there’s a process which we’re going through for lung, and we’re learning from that. And so I think, we continue to be on track with – based on that new LCD, and we’re putting things in place. But apart from just sharing the clear validation, we have no other sort of guide in terms of timing of when to expect that. So that’s sort of an area that we see extremely exciting. But again, we’re on track for what we want to do.

Our next question comes from Alex Nowak with Craig-Hallum Capital Group.

Reg, you've had about 2 months now to get the word out about the KOAR results. What's the initial feedback from the transplant doctors? And how do you think this changes AlloSure's utilization now that doctors can see if they follow a protocol, they're going to have less graft failure?

Yes. Alex, that's a really good question. I mean, I think as we've rolled out, we had KOAR at first announced at ATC and had sort of multiple sort of phone calls across the country. I think there's a strong level of excitement, but also validation. So I think, in many ways, some of the results that we shared had sort of been seen by some of the centers in the real-time utility, for example, from the ADMIRAL study. And so I think, if anything, it's just further validation and getting long term study data, which we're the only company to have established. So I think that's been really good. Where this could come more in terms of utilization is probably from the commercial pay side. I think that's where this information is being used and sort of requested a bit further by our payer team. And so that -- obviously, this was some interim data, and there's more data to come. But that's where I think the further upside would come from. But I think, we're so well-established in centers, and they've got their experience, this just further adds to it. I mean, there were so many useful insights that came from these long term studies. And again, we're the only ones that have done long term studies. And what we show in advance, that was also the prediction of earlier formation, for example, of DSAs through DeNovo DSA. So I think, things like that, which have been repeatedly shown in these long term studies first in the ADMIRAL and now at KOAR, really reinforces two insights. And I think, seeing that -- now that reduction in biopsies, the increase in the overall outcomes with length. It was just really compelling and powerful. But centers and users were seeing that as well as part of their own experience.

Okay. Understood. And can you just clarify what you said on AlloSure along with the tech assessment, where that stands? When do you expect that to be finalized? And then, when would you expect the OKRA study to read out? Any update there?

Okay. I'll cover the lung part, and then Reg cover the second part on OKRA. So overall, on the lung side, no change. The status, as we've said before, the -- we are under technical assessment with MolDx, the dossier in all of the details that MolDx has requested under the new LCD have been filed. And based on the process that has been communicated, we would expect the results sometime in the half 2 of this year.

On OKRA, I mean, we’ve shared and consistently, I think, we’re still on track to complete enrollment of OKRA before the end of the year. What’s clear is, centers really crave innovation. And this multi-modal approach that we’ve taken with KidneyCare, which includes AlloSure, AlloMap plus, iBox, has really been strengthened, has really just moved very quickly because of that unmet need and that drive to work with leaders on innovation. Into – so the completion of enrollment will take place by the end of the year. And I think, Alex, no surprise as we start generating day of the future process and then getting to OKRA 1000 right in the future. So as we continue to develop long term studies innovation, we’ve got KOAR-1000 with more data coming. Clearly, once we finish enrolling OKRA, then that will be the next sort of thing. The goal is to keep on moving the needle with innovation, right? We’re the market leader, and we’re so well known in transplant and people have just come to expect us to bring the innovation, so we continue to do that.

Our next question comes from Mark Massaro with BTIG.

Congrats on a strong quarter. Yes. So you beat by 9% on the top line, $6.4 million and you raised the guide by $10 million for the year. I mean, should we think about the delta or call it, $3.5 million or so for each of Q3 and Q4 or do you think it could be more weighted to Q4?

Yes. I would probably keep it equal between Q3 and Q4. The overall -- the -- as I was saying earlier around the guidance, we're very pleased with the momentum on the adoption side and the fundamental business model on trying to -- continuing to drive this market penetration is the model we're working with. So if you use that, so I would take it across half 2.

Okay. And this looks like it's your fifth consecutive quarter of both double digit revenue and volume growth sequentially. And so when I think about your business, obviously, an increase in the attach rate on Allo -- on heart care, higher utilization with RemoTraC, greater outreach to community nephrologists. Are there any reasons to think that you can't continue this double digit type growth trajectory on a sequential basis? I guess, what types of things could we look out for that might render that growth rate unsustainable?

Yes. I think as where you're pointing, Mark, we have a fairly large and very attractive market in front of us where we're in the early stages of market penetration. So the model that we're working on that Greg just described around the direct to center side, where we continue to introduce and add our products into centers or continue to drive protocols and their adoptions. That business model continues. We still have long ways to go. We've had tremendous success over the last 4 to 5 quarters, both in the centers as well as starting in the nephrology setting at the start of this year. And that remains our biggest focus going forward as well. As of now, we haven't seen anything, right, that would point to any change in adoption or momentum there. The range of the guidance, as I was talking about earlier, it would also not be prudent for us to keep our eyes off whatever is going on relative to COVID variants, et cetera, especially on the product side of our business. But in the core services side, the business momentum was quite good.

That's great. And then would be curious to learn more about your allogeneic cell therapy business. And if you have any update on the work with Atara Biotherapeutics and can you just give us a sense for how the AlloCell product is -- what kind of feedback you're getting and if there's been any new customer activity there?

Yes, Mark, I mean, we're very excited by the different areas of transplant we're going to. So moving from solid organ to we just talked briefly about the stem cell space and clearly into the cell therapy space with AlloCell. The only public disclosed offering that we can mention is Atara because the other partnerships have not allowed us to mention those. And even with Atara, we had to actually -- we role our disclose until we kept on asking them and they finally were okay with us showing at the TCD conference. So we continue to see strong interest and partnerships across companies. And I think it's an area that we'd love to share more about potentially at some point in at Investor Day. It's really a bit dependent on others allow us to do so. I think the key thing here is the feedback is, having a standardized really sort of sensitive test is for being really helpful. As we've got feedback from the different companies because there's no real standard today. And so I think a couple have developed their own home rules, but if they use AlloCell, they go, okay, this is great, now every way using a reference standard and using across the samples that they have had today. We've had multiple ad boards as well, and I think there's been a really strong level of excitement of even partnering and wanting to work with us as well, amplified as a result of what they're hearing from some of the other partner companies as well. So strong, I think, positive sort of interest. And I think, obviously, the only thing it's inside of our hands in the terms of showing who those are, and secondly, just as long as these studies continue because we had some examples, where some partners decided to deprioritize or some partners decided to discontinue programs. So I think sometimes is subject to the whims of drug development. But again, strong interest, and this is sign that we continue to invest in growing.

Okay. Great. And as you're nearing a final Medicare determination for lung, can you maybe characterize how synergistic the lung opportunity is with the kidney and the heart? I guess any statistics you have on the number of transplant centers that are really working with all three versus any specialty transplant centers?

Yes. I mean, I think you've seen the Venn diagram, if you cover all the kidney centers, the 220 plus, and you pretty much cover everything that's above and below diaphragm. And I think for us, it's -- you don't have to expand or go into different centers as a result of that. What I can say is that, having this pan organ approach is I think that's really special. I've been out of the field over the last couple of months, and each of these different center meetings I attended, they are pan organ experiences. So I do think there's an increasing recognition, particularly as we now bring along, we had the above diaphragm, the heart-lung sort of story as well as the below diaphragm, which is kidney and liver. And I think I think it were those two ways, but certainly, there's existing synergies and efficiencies because it's already present in above and below diaphragm. And so it makes it a very high-efficient way to deploy our team, but more importantly, we just have such a strong presence and the offerings that we have allow for that cross portfolio usage whether it's the Ottr, whether it's the TransChart, whether it's the AlloCare, whether it's the Waitlist Management, whether it's other offerings that we have in development as well. So you're absolutely right. There's a very concentrated pool of centers and places that we've been able to build upon.

Great. And just final question from me. Can you talk about your work with HistoMap and UroMap and development progress there and when we could expect to see those products?

Yes. UroMap is in development as well as HistoMap. I mean, I think they’re both making really nice progress. I think UroMap on the clear lab side at this stage and HistoMap still in more on the development stage, but both are on track from what we had sort of internally have in our time lines. But these are exciting offerings that we already have in place in terms of looking at our multimodal study. So HistoMap, for example, is being used in a couple of different studies as part of that multimodal approach that we’re using as well.

Our next question comes from Yi Chen with H.C. Wainwright.

Looking at the revenue of 2020, the first half represents about 42% of the total 2020 revenue and the first half of 2021 revenue already represent 50% of the midpoint of your guidance. So can you comment now whether you're being conservative about your revenue guidance or there is some other elements in the second half of this year that we should consider them with potentially slow growth?

Yi Chen, yes, good observation there. I think the only thing I would say is the seasonality last year had COVID impact, both in the first half of the year, and then second half, as we built and rolled out RemoTraC, which was hugely beneficial for the patients and for us. It gave a nice pickup in the business in the second half. So the point being, last year's seasonality in the half 1 versus half 2 was quite unique for the year that it was. This year will play out on its own seasonality.

Got it. And also, could you comment on what percentage of lung transplant patients are covered by Medicare?

About 25% to 30%.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would now like to turn the call back to Reg for closing remarks.

Thanks very much. I want to thank everyone who’s on the call today, really for taking interest of what we do as a company. I mean, at the essence, what we do is really how do we help transplant patients, and I think having analysts and investors who take interest in covering us, but also listening to what we do is a real privilege and honor, and I just want to thank each and every one of you for taking the time. We have a really important goal in – as a company and the more that we can help support patients, the more that we think we’re contributing to our overall mission. So thank you again, and I hope you all have a great rest of the day. Thank you. Bye now.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.