BIODESIX INC Q3 FY2024 earnings call

• Sales Team Expansion: Focused on adding sales teammates in new territories and upgrading talent, with an expectation that the average number of fully contributing sales team members in the fourth quarter will be between 70 and 75.
• Lung Diagnostic Test Adoption: Test volumes grew 34% year-over-year. Added new private payer coverages, presented new data at the CHEST annual meeting, and announced the CLARIFY study, a multi-center retrospective chart review study.
• Biopharma Services: Saw increasing demand, with dollars under contract but not yet recognized as revenue at $11.1 million, up from $8.1 million at the end of Q2. Revenue in the quarter was down 17% due to project timing.
• Financials: Gross margin was 77.0% in Q3, operating expense increased 29% year-over-year, net loss improved 6%, and ended the quarter with $31.4 million in unrestricted cash and cash equivalents.

Lung Diagnostic Testing: Third quarter revenue was $17.2 million, a 40% year-over-year increase, with 34% growth in test volumes. Revenue contribution: approximately 94.5% of total revenue. Biopharma Services: Revenue was $1.0 million, a 17% decrease year-over-year. Dollars under contract but not yet recognized as revenue were $11.1 million, up from $8.1 million at the end of the second quarter. Revenue contribution: approximately 5.5% of total revenue.

• Reiterated 2024 full-year revenue guidance of $70 million to $72 million.
• Expect to achieve adjusted EBITDA breakeven in the second half of 2025.

• Hurricane Impact: Hurricanes in the Southeast affected testing volumes in the last two weeks of Q3, but long-term impact on the business is expected to be minimal.
• Medicare Advantage Issues: Continues to work on addressing backlog with payers, but no change in the backlog and no expansion to other groups.

Q: Maybe to start here on CHEST. Scott, I think you referenced in your prepared remarks that it resulted in some momentum again this year for the business? Can you maybe just be a little bit more specific on your sort of expectations for how that might play out in the utilization metric going forward for your ordering docs? And I guess related to that, from your standpoint, just high level, can you talk about how interest in the Notify franchise has sort of evolved at that conference over the last few years?

A: Yes. Great question. Thank you, Andrew. As I stated, it was a record chest for us this year. When we showed in Boston, really reminded ourselves that this is only the third CHEST back in person since the pandemic started. So really a huge opportunity for us to show, continue to educate, inform and empower physicians based upon our progress that we've made on Nodify. When it comes to the leads in our expectations, what we've noticed over the last 3 CHEST, those 3 that were in person, 3 years ago, we were back reintroducing ourselves welcoming people back after a long hiatus due to COVID. About a year ago, when we were in Hawaii, what we noticed as we had a lot of peer-to-peer introductions, physicians walking into the booth and introducing us to a friend or someone they trained with. This year, what we noticed was we weren't really pulling people into the booth. We had people lining up. They had heard of us, they had read the papers. The question's changed and we think it's a wonderful evolution to where now the questions were, if I haven't met my local rep, who's my local rep, what does workflow integration look like? And how soon can you come in and help me and my staff with that. So we saw that really as a shift from historically a push to a poll which is wonderful when you really consider adoption in a commercial product. Our expectations coming out of CHEST, we look at it as those are always going to be hot leads. Somebody who comes in on their own accord, ask for a follow-up. We turn those leads back over to the sales reps immediately following the meeting. And here we are a couple of weeks out. Every one of those physicians will have received kind of a follow-up call, an introduction to their local rep if they hadn't met them. And then, a follow-up scheduled so that we can go through how best do we implement notified testing into their practice. It's changed a lot and we're proud of it. We keep reminding ourselves, we have a first-mover advantage but we're also developing this market. And so each and every interaction is a significant opportunity for us to educate on the merits of notified testing. And what we noticed at this meeting was a big shift. Limited competition; we've talked about that even during some of the panel presentations and some of the debates it really was a reference to, if you're interested in biomarker or molecular testing, Biodesix is the company to go visit. And so we were referenced by name. They even encouraged people to stop by our booth. And from a health care professional standpoint, we've seen not only significant growth in adoption. But to see that peer-to-peer referral gives us a lot of confidence that the tests are impacting not only those patients that those physicians treat but they're making a big difference in the health care practice. So we're really grateful CHEST happens each year in the fall. The best thing about the timing for us Andrew, is it gives us the ability to follow up on those leads now Hopefully, we see some traction here in the fourth quarter on those new leads but really sets us up for those to be part of the contributing accounts that aid growth and drive and fuel that growth early in 2025.

Q: Starting with biopharma, Scott, you said there's a large project that shifted from the end of the third quarter into 4Q and that was the driver of the sequential revenue decline. Are you expecting revenue in that segment in biopharma to kind of like increase sequentially in 4Q? Maybe just -- and also any budget flush dynamics you're thinking about? And is your forecast for the full year biopharma revenue unchanged relative to the 2Q update, albeit some shifting in like revenue and timing and stuff.

A: Yes. Kyle, great question. I'll go in reverse order. Yes, it remains unchanged. All of the contracts, as we get closer into the year, all of the contracts are kind of flooded. We've got them in queue in the laboratory. This was really -- at the end of the third quarter, it was really based upon receipt of samples. And so receipt of samples was delayed a few weeks. We did receive -- start receiving those samples with about 2 to 3 weeks left in the quarter. And as they came in, obviously, time just really ran out. The good news and I'm happy to report all of those samples from that pretty significant run have been run and have been repurposed and delivered back to the biopharma partner. So we looked at it as really just a push. As we look at the fourth quarter, we're always mindful of time. Right? We know what we have in queue. At this point in time, we'll be ready for any bluebirds that present. But again, as we progress through the quarter, the likelihood decreases. But we feel confident in our projections for the fourth quarter and as you've noted, this book of business continues to grow and we're really proud and excited to share that we've got $11.1 million under contract but not yet recognized as revenue. That really demonstrates that we're poised and set up for a strong start to 2025 and feel pretty confident that this can continue to grow and we can leverage that progress and momentum. Robin Harper Cowie: And Kyle, you're exactly right. The aggregate second half number, we expect to be on track for what we talked about in the second quarter. Just the mix of third quarter and fourth quarter is just a little bit different but the total should be the same.

Q: Starting with biopharma, Scott, you said there's a large project that shifted from the end of the third quarter into 4Q and that was the driver of the sequential revenue decline. Are you expecting revenue in that segment in biopharma to kind of like increase sequentially in 4Q? Maybe just -- and also any budget flush dynamics you're thinking about? And is your forecast for the full year biopharma revenue unchanged relative to the 2Q update, albeit some shifting in like revenue and timing and stuff.

A: Yes. Kyle, great question. I'll go in reverse order. Yes, it remains unchanged. All of the contracts, as we get closer into the year, all of the contracts are kind of flooded. We've got them in queue in the laboratory. This was really -- at the end of the third quarter, it was really based upon receipt of samples. And so receipt of samples was delayed a few weeks. We did receive -- start receiving those samples with about 2 to 3 weeks left in the quarter. And as they came in, obviously, time just really ran out. The good news and I'm happy to report all of those samples from that pretty significant run have been run and have been repurposed and delivered back to the biopharma partner. So we looked at it as really just a push. As we look at the fourth quarter, we're always mindful of time. Right? We know what we have in queue. At this point in time, we'll be ready for any bluebirds that present. But again, as we progress through the quarter, the likelihood decreases. But we feel confident in our projections for the fourth quarter and as you've noted, this book of business continues to grow and we're really proud and excited to share that we've got $11.1 million under contract but not yet recognized as revenue. That really demonstrates that we're poised and set up for a strong start to 2025 and feel pretty confident that this can continue to grow and we can leverage that progress and momentum. Robin Harper Cowie: And Kyle, you're exactly right. The aggregate second half number, we expect to be on track for what we talked about in the second quarter. Just the mix of third quarter and fourth quarter is just a little bit different but the total should be the same.

Q: Maybe one for Robin. It's really nice to see the revenue per test growth. I think based on our model, it seems like a record quarter. I was wondering if there may have been any kind of onetime cash collection from prior periods? Or could we anticipate this type of cadence going forward based on the funnel of private payer opportunities that you guys might have?

A: Thanks for the question. I'm very happy to report that it's all current quarter. So no impact from unusual onetime items from prior periods. So you are correct. It's one of our best ASPs, really quite pleased with how the reimbursement wins that we've been able to announce over the last several quarters have really started to impact our day-to-day ASP.

Q: Maybe one for Robin. It's really nice to see the revenue per test growth. I think based on our model, it seems like a record quarter. I was wondering if there may have been any kind of onetime cash collection from prior periods? Or could we anticipate this type of cadence going forward based on the funnel of private payer opportunities that you guys might have?

A: Thanks for the question. I'm very happy to report that it's all current quarter. So no impact from unusual onetime items from prior periods. So you are correct. It's one of our best ASPs, really quite pleased with how the reimbursement wins that we've been able to announce over the last several quarters have really started to impact our day-to-day ASP.

Q: I appreciate you taking our questions. Just a follow-up on the hurricane discussion we've had. So Milton came 1.5 weeks or so after Helene. So 2 parts to this. There's the one thing about evacuations and then the actual hurricane happening. But as you look at the first couple of weeks of October, was there still some lingering challenges there from a customer perspective and generating samples? How long did that go on?

A: Yes, Thomas, great question. There definitely was. And I think we all saw it. What was interesting about that was it also coincided with CHEST. So what we saw was when we were in Boston, some physicians coming up to us and saying, hey, I've got to leave CHEST early, I need to get back and need to help my family. We even had some of our teammates that were impacted. We have a pretty significant Biodesix team representation in the State of Florida. We've got 15 Biodesix team members that live in Florida. I'm happy to report that they're all safe. But that gives us an indication when we see them evacuate we also know when they can get back in so we can start to track if they're back in, then you assume that many others in the community are -- that impact not just for Helene and kind of the hurricanes this year but we've seen it over time. It doesn't happen immediate. There is a lag. I would state this and our hearts go out to all of those impacted but I think where the greatest impact is and we're still trying to track and monitor is going to be more up into the Carolinas, that the inland flooding was pretty significant. We do note that even to date, that access there is limited. So for us, we do the best we can to track those physicians. We don't necessarily have the ability to track an individual patient that's scheduled but in working with those practices, we'll continue to support them. I think the way we look at it, Thomas, is we know that there's a backlog of patients and most pulmonology offices are booked out months in advance. So as they return, they already have a full schedule to return back to. The question is, how quickly can they add those patients that were missed over those last few weeks back into that queue. We don't see a major bolus or kind of a push or catch-up, if you will. It's really related to the number of office visits that a physician can take on any given day. So our sales reps continue to work kind of one by one, assessing what's going on within their territory. They communicate that to us and we're happy to report that we have seen the recovery begin and improve over the last few days and weeks. But there's always a little bit of a lingering impact. And we'll continue to support those practices and most importantly, we'll be there as they start treating those patients again. But we're excited to state that we don't see a long-term impact. We don't think that will impact us into Q4 at all.