Biodesix, Inc. (BDSX) on Q3 2023 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the Biodesix Quarter Three 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Chris Brinzey, Investor Relations. Please go ahead.
Chris Brinzey: Thank you, operator and good afternoon everyone. Thank you for joining us today for a discussion of Biodesix’ third quarter 2023 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 2023. A copy of the release can be found on the investor relations page of the company website. 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 ending December 31, 2022, filed with the SEC on March 6, 2023, as well as subsequent quarterly reports on Form 10-Q filed during 2023 as 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. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation to the most directly comparable GAAP financial measures is available in the press release we issued today. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?
Scott Hutton: Thank you, Chris. Biodesix is a patient-centric, mission-driven lung disease diagnostic company with a focus on uniting physicians, patients and biopharma to transform the standard of care and improve outcomes with personalized diagnostics. At Biodesix, we’ve built a comprehensive portfolio of precision diagnostic test to support clinical decision-making across the lung cancer continuum of care. Our lung diagnostic testing portfolio ranges from initial risk assessment of lung nodules with Nodify Lung testing to post-cancer diagnosis treatment guidance and monitoring with IQLung testing. Nodify Lung consists of two blood-based proteomic tests, Nodify CDT and Nodify XL2, which are used by physicians to assess the risk of malignancy of a lung nodule. IQLung consists of 3 blood-based tests, the GeneStrat ddPCR targeted genomic test, the GeneStrat NGS genomic test and the VeriStrat proteomic test. Offered as options within IQLung, these three tests are used to inform treatment decisions and monitor for the rise of resistance mutations while patients are on therapy. All five of our lung diagnostic tests are covered by Medicare. And we believe we’re the only diagnostic company with five on-market tests for lung cancer, all with Medicare coverage. Similar to prior quarters, the third quarter was defined by significant progress across the business. We grew lung diagnostic test volumes and revenue, saw a healthy rebound in our biopharmaceutical partnerships and services business, expanded our gross margins to the mid-70s and did so while reducing operating expense. Clearly our commitment to a cost-disciplined approach while growing and expanding the business continues to pay off. And I believe everyone is beginning to appreciate the leverage that exists within the business model and our efforts to demonstrate the team’s significant progress and outstanding execution on our path to profitability. We’re pleased that our lung diagnostic sales adoption continues to gain momentum. We delivered 10,400 test results, increasing by 60% compared to the 6,500 test results delivered in the third quarter of 2022 and another sequential increase over the second quarter of ‘23. This is five straight quarters of at least 60% year-over-year growth and is primarily driven by our Nodify Lung testing volumes. One of the more significant annual events for the Biodesix commercial team is the American College of Chest Physicians or CHEST annual meeting. Last year was the first year returning to an in-person event, and it laid the groundwork for the growth and momentum we’re experiencing in 2023. Having just returned from the 2023 annual CHEST meeting, which had a record number of health care providers in attendance, I feel like Biodesix’ presence exceeded last year’s strong showing, with clear evidence of the physician community’s growing interest in how our products can benefit the diagnosis and treatment of their patients. While these health care professional meetings do present an opportunity to expand our commercial profile within the health care provider community, we also rely on these conferences to share data and outcomes related to the importance of our products and to further support clinical adoption and reimbursement. This past quarter was another productive period where we published and shared numerous updates at multiple meetings. In July, we published the primary analysis from the prospective ORACLE study examining the clinical utility of the Nodify XL2 test in real-world patient utilization and also the impact on patient treatment. It is important to remember that demonstrating clinical utility is a critical and necessary step to drive the adoption of any diagnostic test. And we’re excited that the ORACLE study exceeded our expectations, demonstrating a 74% relative reduction in unnecessary and costly invasive procedures. Overall, the findings from the ORACLE study represent a significant advancement in the clinical evidence for use of the Nodify XL2 test in nodule management. At the sixth annual conference of the American Association for Bronchology and Interventional Pulmonology or AABIP in August, a subgroup analysis of ORACLE data was presented. The data showed that reducing unnecessary invasive procedures on benign nodules improved patient selection for diagnostic biopsy. Prior to implementation of the Nodify XL2 test, 49% of patients receiving a biopsy actually had a lung cancer diagnosis compared to 74% when the Nodify XL2 test was used in clinical decision-making, representing a 51% relative increase in the cancer diagnosis rate. In September, we shared two presentations at the International Association for the Study of Lung Cancer 2023 world lung conference. The first presentation highlighted a new analysis of the large multicenter prospective observational INSIGHT registry study that demonstrated VeriStrat’s ability to predict response to immune checkpoint inhibitor regimens in patients with advanced-stage non-small cell lung cancer. The growing evidence around the VeriStrat test complements today’s current standard of care and is proving to be a valuable test that physicians can use to guide the optimal treatment for patients. Lastly, in October, we presented 2 abstracts at the CHEST meeting. The first was a subgroup analysis from the ORACLE study that underscores the transformative potential of the Nodify XL2 test in managing all types of lung nodules. The second was an analysis of patients with both PET imaging and Nodify CDT results, demonstrating the complementary nature of the results in guiding clinical decision-making. Continuing to build the body of supportive evidence remains a key component of our strategy to demonstrate the clinical utility of our tests to both health care providers and payers. In addition to the growth in volumes driven by our sales team, broadening reimbursement coverage remains an important part of our growth strategy. In July, the Nodify CDT test was awarded advanced diagnostic laboratory test or ADLT status by the Center for Medicare and Medicaid services. Receiving ADLT status was a major milestone for the Biodesix team, as this status is reserved for innovative tests with Medicare coverage that provide clinical value and new diagnostic information that cannot be obtained from any other test or combination of tests, recognizing the unique utility of Nodify CDT. Now Biodesix has 3 tests, Nodify CDT, Nodify XL2 and VeriStrat, all with ADLT status. We will continue to expand and build upon our reimbursement coverage and expect to have additional updates in the coming months. Moving on to our biopharmaceutical partnership and service business. In the third quarter, we reported revenue of $1.2 million, which represents a significant improvement of 79% year-over-year growth and 181% over the second quarter. We are encouraged with the strong growth this quarter and pleased to see an increasing number of samples received from a number of different biopharmaceutical companies running multiple clinical studies. Equally as encouraging is the continued strength we’re seeing in our biopharma partnership and services volume of incoming requests for proposal; and ultimately, dollars under contract but not yet recognized as revenue, which even with the solid performance in the quarter, expanded and now stands at $9.9 million under contract but not yet recognized as revenue. Before I turn the call over to Robin, I’d like to reiterate our commitment to transform the standard of care in lung cancer and improve patient outcomes with personalized diagnostics. Lung cancer is still the deadliest of all cancers, as it claims more lives annually in the United States than the combined total of the next 3 deadliest cancers, breast, prostate and colon cancer. Time is of the essence when it comes to diagnosing and treating these patients. November is lung cancer awareness month, when we come together in the lung cancer community to educate and empower patients and health care providers to screen, detect, diagnose and treat lung cancer early. By discovering, developing and commercializing tests with demonstrated clinical utility and best-in-class turnaround times, we believe that our diagnostic tests play a critical role in these efforts to treat the right patients quickly and effectively. With that, let me turn it over to Robin to review the third quarter 2023 financial performance. Robin?
Robin Harper Cowie: Thanks, Scott. Third quarter total revenue was $13.5 million, a 21% increase over the prior year, including COVID revenue; and a 37% increase over the prior year, excluding COVID revenue of $1.3 million. Lung diagnostic revenue in the third quarter was $12.3 million compared to $9.2 million for the third quarter of 2022, an increase of 34% over the prior year. Third quarter 2022 included approximately $1.5 million in cash revenue from tests performed in prior periods largely as a result of the positive coverage decision by Medicare for Nodify CDT. Excluding this amount, revenues grew approximately 60%. As Scott mentioned, we delivered 10,400 lung diagnostic test results versus 6,500 test results for the third quarter 2022, a 60% increase and our fifth straight quarter of at least 60% year-over-year growth. Biopharmaceutical services revenue was $1.2 million in the quarter compared to $664,000 in the third quarter 2022 and $423,000 in the second quarter of 2023, an increase of 79% compared to the third quarter 2022 and an increase of 181% over second quarter 2023. As a reminder: This business can fluctuate due to several factors, including contract timing and project execution, but in this instance reflects increases in sample volumes received from multiple clinical studies. As Scott mentioned, we ended the third quarter of 2023 with $9.9 million contracted but not yet recognized as revenue, a 6.5% increase over the second quarter 2023 and 38% increase over third quarter of 2022. These dollars are tied to multiple agreements with different time lines and will be recognized as these projects are executed. Gross margin percentage in the third quarter 2023 was 76% versus 67% in the prior year quarter and 73% in the second quarter of 2023. Current gross margin trend reflects the growth in our higher-margin lung diagnostic testing business, successful completion of projects to decrease costs and optimize testing workflows and cessation of COVID testing. We anticipate the ability to maintain margins in the low to mid-70s going forward. Overall operating expense excluding direct costs and expenses was $17.4 million in the third quarter of 2023 compared to $18.1 million for the same period of 2022 and $19.6 million in the second quarter of 2023. The decrease in operating expense versus last year is primarily the result of a decrease in R&D expense, partially offset by increased sales and marketing costs to support lung diagnostic sales growth to enhance product awareness and drive adoption. The decrease as compared to the second quarter is related to the realization of savings from our prioritization of projects that are expected to result in near-term revenue and the delay of longer-term projects. Operating expense for third quarter 2023 includes $1.0 million in non-cash stock compensation expense, as compared to $1.2 million during the third quarter 2022 and $1.1 million in second quarter 2023. Net loss for the third quarter 2023 was $10.9 million compared to a $13.7 million net loss for the same period of 2022 and $13.4 million for second quarter 2023, driven by the increase in revenue, improvements in gross margin and reduction in operating expenses. The decrease in net loss for the quarter included a reduction in non-cash stock-based compensation and decrease in total interest expense, partially offset by a $1.4 million non-cash charge due to the change in fair value of warrant liabilities associated with warrant certificates tied to the anticipated drawdown of the $10 million tranche B from the Perceptive Advisors term loan facility in the fourth quarter. To provide better clarity of our progress on our path to profitability, we are now reporting adjusted EBITDA, which excludes certain non-cash items and COVID-19 testing revenue and direct costs and expenses. Adjusted EBITDA for the third quarter 2023 was a loss of $5.4 million compared to a loss of $9.1 million for both the third quarter of 2022 and second quarter 2023, a 40% improvement over both periods and notably a 60% improvement over the first quarter of 2023. The improvement in adjusted EBITDA in the quarter demonstrates our focus on actively managing our operating expenses, our success in improving gross margins and driving growth in the top line revenue. We ended the quarter with $19.8 million in unrestricted cash and cash equivalents, as compared to $17.4 million in unrestricted cash and cash equivalents at the end of the second quarter, an increase of $2.4 million which included the scheduled milestone payment of $3.3 million paid in July 2023 to Integrated Diagnostics, changes in working capital; and also includes $5.3 million in tenant improvement dollars, which are now exhausted, offset by $5.8 million in investment in the new facility. In addition, the cash balance included $15.3 million of the $27.5 million private placement announced in August. In the fourth quarter, the company will receive the remaining $12.2 million from the private placement and also plans to draw down an additional $10 million from tranche B of its $50 million term loan facility with Perceptive Advisors. I do want to highlight a required shift in display of the milestone payments to Integrated Diagnostics on our statement of cash flows, for clarity. Payments made through third quarter 2023 have been classified as cash outflows from financing activities in our statement of cash flows. However, beginning with the portion of the milestone payment made in October 2023 as well as all milestone payments to be made in 2024, these payments will now be classified as cash outflows from operating activities due to the applicable U.S. GAAP requirements. The dollar amounts are not changing, just where they’re required to be captured on the statement of cash flows. In the coming weeks, we will be moving in to our new state-of-the-art corporate facility in Louisville, Colorado, near our current Boulder location. The new facility has improved capacity for lung diagnostic testing, biopharmaceutical services testing, specimen collection kit manufacturing as well as other collaborative services. During the construction of the new facility, materials and equipment were incorporated to optimize energy efficiency and reduce emissions, advancing some of our longer-term ESG goals. Finally turning to guidance. At the beginning of this year, in our fourth quarter 2022 earnings call, we disclosed that we were experiencing a delay in collections for Medicare Advantage tests that were performed in prior periods from a small number of payers and expected the revenue will be recognized upon cash collection in the second half of 2023, thus including it in our full year 2023 guide. While we have made progress and now have begun receiving some payments, given the ongoing variability around the timing of receiving the payments, we are now pulling the backlog balance of $2.5 million to $3 million from our 2023 guidance, taking us to $50 million to $52 million. The spread is based on the variability of the timing of collections. Of note, this is not a change to our core business. And guidance continues to assume continued strong year-over-year growth in our lung diagnostic testing business, broader reimbursement of our 5 on-market tests as well as modest expected growth in our biopharmaceutical services business. Now let me turn it back to Scott. Scott?
Scott Hutton: Thanks, Robin. In closing, I want to express my gratitude to all the remarkable members of the Biodesix team, who’s shown unwavering belief in and dedication to our mission, vision and culture. Our collective commitment and daily contributions are centered around making a positive impact on the lives of patients, and I’m truly thankful for your efforts. We have again experienced strong double-digit growth in the past quarter, attributed to the exceptional performance of our dedicated lung-focused sales team, who’ve been instrumental in fueling our growth and success. We’ve improved our already strong gross margins and made substantial progress in our path to profitability. We published critical clinical data that demonstrates the utility of our tests, supporting both physician and payer adoption, and achieved a major reimbursement milestone. By aligning these strategic efforts, we’re confident in our ability to sustain our growth trajectory; make progress on our path to profitability; and deliver value to our physicians, their patients and all shareholders. We look forward to moving in to our new state-of-the-art facility that affords us the opportunity to grow and expand in an efficient, effective and environmentally friendly manner. With that, I’ll turn the call over to the operator for questions.
Operator: Thank you. [Operator Instructions] Our first question comes from Andrew Brackmann of William Blair. Your line is now open.
Dustin Scaringe: Yes. Hi, this is Dustin on the line for Andrew. Thanks for taking our questions. First, Robin and Scott, just wondering what gives you guys confidence for the 4Q ramp in diagnostic revenues. I know you touched on that a little bit but just wondering what trends you’re seeing thus far and then how that might inform growth in 2024. Thank you.
Scott Hutton: Yes. Thanks, Dustin. Nice to hear from you. And great question. As we’ve continued to build out our sales force – and you may recall, last year, at this time, we introduced a pilot which we focused on an associate sales consultant kind of support mechanism. We’ve continued to build that out, but we’ve still got less than 36 territories, so we’ve got tremendous opportunity to continue to expand. And what we know and we’ve learned is, if we can decrease the size of a territory, you’re minimizing overnights, plane flights, windshield times. You’re going to drive down costs. And you’re going to make those sales professionals more readily available and accessible to the accounts they call on, so we’ve got plenty of room to continue to invest and expand that sales force; also continuing to add associate sales consultants, which will really free up our really strong sales professionals to go back out and hunt while they maintain and manage onboarding new accounts.
Dustin Scaringe: Understood. Thanks for that. And kind of related to that, how are – how is everything tracking with the sales force relative to expectations? And when you’re thinking about 2024, when can that sales rep productivity kind of reach the level that you’re hoping for?
Scott Hutton: Yes, it’s a great question. And we track a number of key metrics. What we’ve shared in the past is that we’ve seen our sales professionals over the last 12 to 18 months ramp quicker than ever. You may recall, middle of last year, we had shared that it took about 6 months to get to a productivity level that we were pleased with. Then shortly thereafter, we noted that, that continued to decrease and was closer to 2 to 3 months. We’re more in that 2 to 3-month range, so we feel good that a new hire in a new territory can ramp and scale rather quickly, providing an opportunity for them to start paying for themselves sooner. When it comes to sales rep total productivity, we’ve also highlighted over time that we’re yet to see a sales professional cap out. We have a number of sales professionals on a monthly and quarterly basis that have recently established new kind of high watermarks. And their performance continues to improve and grow, so we think it gives us additional hope that the sales reps we currently have can continue to thrive and win additional accounts and most importantly partner with their physicians to help provide the care that their patients need. And then we can continue to add additional sales force reinforcements. We think there is a big opportunity. Lung cancer is the deadliest of all cancers. We know that there is over 1.7 million lung nodules identified incidentally on an annual basis. And we know that we’re having a hard time getting to all of those patients, so tremendous opportunity for us to continue to invest, scale and grow.
Dustin Scaringe: Got it, appreciate that, Scott. Just one more for us: Good to see OpEx step down sequentially. Wondering how you’re thinking about that in the fourth quarter, into next year. And then related to that, on the new adjusted EBITDA metric, is that something you guys plan on guiding to next year? Thank you.
Robin Harper Cowie: Yes, we’ve been working very hard over the last several quarters, as we’ve talked about, focusing on projects that are related to near-term revenue growth and while making progress on our path to profitability. We’re very pleased to see that 40% improvement in adjusted EBITDA over the second quarter and 60% over the first quarter. As Scott mentioned, we did start hiring some additional associate sales consultants at the very end of the third quarter, so I would expect to see a little bit of an uptick on OpEx in the fourth quarter and potentially a little bit more in the first quarter as we consider adding additional reps in the first quarter as well as we work to build and capitalize on the demand in the field for 2024 and 2025.
Dustin Scaringe: Appreciate that. Thanks for taking our questions.
Scott Hutton: Thanks, Dustin.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Kyle Mikson of Canaccord Genuity. Your line is now open.
Kyle Mikson: Hi, guys. Thanks for the questions. Congrats on the core strength. So on the guidance reduction, maybe just like walk through that with some more, I guess, like clarity or like kind of detail. Because early in the year, you thought you were going to get these claims in the back half. And then it’s related to MA, so I mean, is there something – and like does this have to do with private payers as well? Because I’m thinking like some of the carriers, the sponsors for some of these plans are probably like United and Humana and those plans, so it seems like this could persist maybe. And if you could just comment on those factors, it would be helpful for us. Thanks.
Robin Harper Cowie: Yes, absolutely. Thanks for joining, Kyle. Yes, all of this backlog is related to Medicare Advantage. And these are all claims that have met the Medicare coverage criteria, but we’re dealing with some administrative hurdles with a couple of private plans that we are working through now. This is not a Biodesix issue. This is not even a diagnostics issue. There have been challenges with some Medicare Advantage plans for pretty much all of healthcare, and there is been a lot of news on that recently. We have made good progress and started to see payments, but it’s just slower than we wanted it to be. We had anticipated seeing those collections in the second half. While they did start, we’re not going – we don’t necessarily expect to get all of it in, in this quarter, although there is possibility. And that’s why we removed the backlog out of the guidance, although left the spread there, so if we do receive some, that would be more towards the top end of the guidance; versus if it continues to be delayed into 2024, that would be at the lower end of the guidance.
Kyle Mikson: Okay, that’s helpful. So it’s – really it’s a function of like, I guess, the adjudication on their end, not like the revenue cycle management on your end. Like that wouldn’t help things. Is that a fair way to think about it?
Robin Harper Cowie: Yes. I would definitely say it’s on their end.
Kyle Mikson: Okay. And then how many claims is this? I mean it definitely seems like it’s – it could be quantified. Can you share anything on that?
Robin Harper Cowie: Yes. Our current estimate is $2.5 million to $3 million in collections. So I would say it’s mostly Nodify XL2 and VeriStrat.
Kyle Mikson: Okay, yes. It helps with the kind of ASP and getting to volume, that kind of thing, all right. And then thinking about the fourth quarter, like – again, like, the ramp, I guess, the sequential increase: You had – volume grew. It was quite strong, quite robust in the first half of the year, over 70% growth year-over-year on – and the core business, of course; this quarter, 60%, I guess. I mean, is that going to maybe dip a bit again? Or could that kind of creep back up into like possibly the 70s from like a volume year-over-year perspective in the fourth quarter?
Scott Hutton: Yes, it’s a great question, Kyle. Again, we believe that it’s still a function of sales reps and putting them in the field, but we want to be mindful and not just run towards 100-plus sales reps. We really are focused on hiring approximately six per quarter, recruiting, training, onboarding them, setting them up for success and getting that return that we want. So again, we want to be mindful of our cost basis and expense structure. We think continuing to do what we’ve been doing and gaining progress towards that path to profitability is critically important, so we do believe confidently that we can state with a high level of confidence that, that 60% range is a range we can stay in. And I think, on any given month or quarter, given the year-over-year comp, we could get that back into the 70% range, but it really will be a function of the number of sales reps that we bring on and the timing.
Kyle Mikson: Okay, that was helpful. And Nodify CDT had the ADLT for the full quarter basically. Can you walk through the impact on the P&L; look on that line item, like, that product, I guess? Like how much of that – a benefit was that? Or is that going to kind of come like end of this year? Next year is like the real benefit from that tailwind.
Scott Hutton: Maybe if I could ask a qualifying question. Are you referring to private payer coverage for CDT?
Kyle Mikson: The ADLT rate.
Scott Hutton: ADLT. Sorry.
Robin Harper Cowie: Yes. So on ADLT: Nodify CDT was awarded existing ADLT status. So there is two different types of ADLT status. There is new ADLT and existing ADLT. For the new ADLTs, they are paid list price on the day that they are first offered, for the first three quarters. For existing ADLTs, they are paid the MAC rate, so we did not experience any increase from the – any price increase from the awarding of ADLT status and continue to receive the $649 per test.
Kyle Mikson: Okay, that’s helpful. And I don’t – like I don’t really like love the gross margin type questions, but I do want to ask why they were – they are very high this quarter, of 76%. And you think you can do like the low- to mid-70% range going forward. What – was there anything in this quarter that’s like onetime in nature, nonrecurring? Because I feel like it was a good result and it seems sort of – it could be sustainable. So why they are not sustainable, I guess, 76%.
Robin Harper Cowie: We – I would say our lung diagnostic gross margins are very strong and very stable. The biggest variability we see in the gross margin numbers are actually in our biopharma contracts. Some can be a little bit more labor intensive than others, which can impact gross margins, but that would be really the only difference in the low 70s to the mid-70s where we are now. But the lung diagnostic gross margins are very, very stable and improved over the course of this year.
Kyle Mikson: Okay. And maybe Scott, just finally, with the – some of the data readouts this year. And like you had CHEST and everything. Is there any potential for like a guideline update or sort of like inclusion in the relative near-term for you guys? And could that like really help drive adoption or just coverage in general potentially?
Scott Hutton: Yes, it’s a great question, Kyle. We’ve referenced this before. The main guidelines for us would be the CHEST guidelines, which is the ACCP guidelines. The CHEST physicians have not updated the ACCP guidelines related to nodule management and cancer treatment since pre pandemic. Any of the changes they have made over the last few quarters and years have really been related to respiratory diseases that have impacted us as a society, whether it’s RSV last year or COVID in prior years, and then the related acute respiratory distress syndrome, so we’re eager for the CHEST physicians, both as a society and physicians the we call on, to make updates to those guidelines. And the short answer really is any inclusion in guidelines will only help, but we believe we can continue to grow without it. We’re building all of the data plans and publishing as much as possible to ensure that – when those different guidelines groups meet and they have an opportunity to review the data, that we put ourselves in the best position possible to be considered for guideline inclusion. And we will continue to do so.
Kyle Mikson: Okay. And you don’t have any like expected timing for anything like around that, do you?
Scott Hutton: No, no. They don’t really publish or give much guidance on when they are planning on updating and who’s involved. As societies, they really want to keep that anonymity. What we’ve seen historically is that ACCP usually is kind of in the back half of the year, so there could still be some updates that they may provide here this year. And then some of the other guidelines, whether it’s Fleischner, NCCN, they update at different cadences or frequencies. I think there is a high likelihood that we will see other physician groups start to create their own new guidelines and start to publish on that. And I think that’s really a reaction to the delays that we’ve seen from some of the major societies. I think we know the rate of change and the pace of change in the world we’re in today is happening maybe at a faster rate than ever before. It’s really questionable to justify not updating certain guidelines over a 4 to 5-year period. We’re hearing that a lot from physicians, so we do expect some updates. And again we’re going to continue to put ourselves in the best position possible regardless of which guideline it might be and we’re going to continue to push and put out the best data possible.
Kyle Mikson: Great. Thanks, Scott. Thanks, Robin. Appreciate it.
Scott Hutton: Yes, thanks, Kyle.
Operator: Thank you. [Operator Instructions] Our next question comes from Tejas Savant from MS. Your line is now open.
Unidentified Analyst: Hi, this is [indiscernible] on for Tejas. Congrats on the quarter. And thanks for taking question. So maybe firstly, I was wondering if you’re still expecting your first private payer coverage for Nodify CDT in 2023. And maybe some color on how we should be thinking about ASPs for the rest of the year, into 2024, on Nodify.
Robin Harper Cowie: Yes. Well, to be honest: We’re just waiting for them to publish so that we can announce publicly, so hope that we will be able to share publicly in the second – the next 2 months of what’s left of 2023, but we’re very pleased with where the team has gotten and the reception that has been happening out in the field for Nodify XL2 and CDT. For us, because Medicare and Medicare Advantage are about 60% to 65% of our claims, an individual private payer will have a relatively limited impact on ASP, but as we start to gather more momentum on the private payer coverage, we will start to see some incremental improvements in ASP. But I would say that’s probably later in the year than fourth quarter and first quarter.
Unidentified Analyst: Perfect, okay. That’s really helpful. And then – know you’re running the ALTITUDE randomized clinical utility study, was wondering if you could provide an update on the enrollment for that and when you think that you may be able to release data from the study and if you think that we could still be seeing some interim analysis before the end of the year.
Scott Hutton: Yes, it’s a great question. At this time, we won’t be conducting an interim analysis before the end of the year. We’ve seen record enrollment kind of month-over-month this year. And you may recall we kicked off the ALTITUDE study in the pandemic. And so patient recruitment was rather slow, which definitely delayed and impacted any potential interim analysis, but we’ve continued to play catch-up there. And those record month-over-month enrollments really have us back on track, but we need to be tracking those patients for a minimum year, so we’re looking at that kind of on a monthly basis. I think, by the next earnings call, we will be able to provide more clarity on potential interim analysis that will occur in 2024 and then where we are kind of in terms of long-term enrollment and when we think we will meet those enrollment criteria, but it’s going exceptionally well. And we’re pleased with the number of sites we have, the engagements and again the enrollment.
Unidentified Analyst: Okay, great to hear that. And then maybe just one more: wondering if you could give an update on the progress of your risk-of-recurrence test and your path to reimbursement and commercialization there and wondering if you have any updated expected time lines that you could speak to.
Scott Hutton: Yes. Our risk of recurrence test, as a reminder and refresher, is a blood-based proteomic test. The blood draw occurs pre surgical resection, and we’re able to identify those patients likely to recur. It really is different than MRD. We recently published on this, and it’s our first published paper. And we’ve continued to support biopharmaceutical conversations and additional conversations with physicians. At this point in time, we’ve not provided any new updates on our plan or timing related to commercialization. We stated at the beginning of the call we’re really mindful of return on every dollar spent. We know that reimbursement for this test would take some time. And we want to continue to invest in our Nodify franchise, so no new updates on timing. I think it’s fair to say that in 2024, at this time, we’re not planning on fully commercializing risk of recurrence, but we will have additional information we can share in coming quarters.
Unidentified Analyst: Awesome. Thanks for the questions. I will pass it on.
Scott Hutton: Thank you.
Operator: I am showing no further questions at this time. I would now like to turn it to Scott Hutton, Chief Executive Officer, for closing remarks.
Scott Hutton: Thank you, operator. We’ve worked long and hard to build the best pulmonology-focused sales team in diagnostics and think that this is just the beginning of our growth. With first-mover status in lung nodule management and an ever-increasing body of robust clinical data, we’re building on the momentum already generated as we increase our clinical and payer adoption in this extremely large and underserved population. Ultimately it’s all about the physicians and the patients they treat, and we believe in our ability to make a more significant impact in the future. This quarter, we delivered on 60% lung diagnostic test volume growth, 79% Biopharma Services growth; provided a 76% gross margin and a 40% improvement in adjusted EBITDA. Our team is constantly working to increase our reach and adoption and improve our operational effectiveness, all while prioritizing a quality-focused Biodesix team and culture. We look forward to updating you on our continued progress and successes in the coming calls and ultimately hosting you in our new state-of-the-art highly accredited facility soon. Thank you.
Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
