CareDx Inc (CDNA) 2015 Q4 法說會逐字稿

Welcome to the CareDx fourth-quarter 2015 financial results conference call. At this time all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question-and-answer session. (Operator Instructions). as a reminder this conference call is being recorded today, March 24, 2016.

I would now like to turn the conference call over to Mark Klausner, investor relations. Please go ahead.

Thank you for participating in today's call. Joining us from CareDx are Peter Maag, President and Chief Executive Officer, and Ken Ludlum, Chief Financial Officer. Earlier today CareDx released financial statements for the quarter and full year ended December 31, 2015. The release is currently available on the Company's website at www.CareDx.com.

Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the 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 fact should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, our examination of historical operating trends, and our future financial expectations are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. CareDx disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 24, 2016.

I will now turn the call over to Peter Maag. Peter?

Thanks, Mark. Good afternoon, everyone. As we have done on our previous quarterly calls I would like to begin with a patient story. As many of us fly United Airlines, you might have followed the Chicago Tribune story about the United CEO, Oscar Munoz. He took over as United's CEO in September, suffered a heart attack in October and received a heart transplant in January, back to work in March. This is quite amazing and highlights the life-changing potential of successful transplantation. It is life-changing stories like this one that inspire us at CareDx.

2015 was a year of substantial progress for CareDx. We closed 2015 having achieved all of our strategic objectives including further development of cell-free DNA with AlloSure, increasing AlloMap patient adoption and pursuing external growth opportunities including the transaction we announced to acquire Allenex.

We will start this call by covering our cell-free DNA pipeline. Then I will cover our AlloMap business and provide an update on the transaction. Ken will cover the financials for the fourth-quarter and full-year 2015 and then we look forward to your questions.

Before we discuss operational highlights, I would like to briefly comment on our overall performance. For the full year 2015, total revenue for the year was $28.1 million with AlloMap revenue being $27.9 million up 8% over 2014. We provided more than 13,000 AlloMap patient results. AlloMap test volume continues to be a strong foundation for our business. We saw 10% year-over-year volume growth which underscores the importance of AlloMap as a core product for CareDx. Ken will talk to the dynamics of test growth versus revenue growth in his section.

Overall, we believe that having reimbursement and billing in-house is a core capability for a molecular diagnostics company. We are succeeding in building eight strong R&D effort centered on our cell-free DNA technology that promises impact on even more patients with focus on kidney transplant surveillance. The increased R&D effort translated into a ramp of R&D expenses primarily associated with the development of our in-house cell-free DNA assay AlloSure and our ongoing clinical trials.

I am extremely pleased with the progress that we are making and the investments that we have made since we first outlined our strategy more than a year ago.

Let me now focus my comments on the three strategic objectives we pursued in 2015, development of cell-free DNA, AlloMap patient adoption and external growth opportunities.

First, I want to highlight the progress we made on AlloSure, our proprietary next-generation sequencing test that measures the percent of donor-derived cell-free DNA in solid organ transplant recipients. Our initial focus for AlloSure will be kidney transplantation.

We completed rigorous analytical validation of AlloSure following professional organization next-generation sequencing guidelines and recommendations such as CAP, AMP, ACMG and ASHT. We used especially designed third-party prepared reference standards quantitatively characterized by digital PCR and the National Institute of Standards in testing human reference genome in the validation to ensure sequence accuracy and quantification.

Computational analysis used custom assembled best-in-class software modules and a cloud platform selected by precision FDA, the FDA's effort in support of President Obama's precision medicine initiative. AlloSure is accurate, reproducible and sets a new bar for thoroughness of analytical validation for a cell-free DNA laboratory developed test.

In 2015, CareDx presented NGS analytical validation recommendations at the FDA's sponsored workshop in November in Washington. We also opened a dedicated purpose built CLIA lab for AlloSure in our Brisbane headquarters. This provides us the ability to offer the latest genomic technologies for our growing pipeline of assays dedicated to improving transplantation management.

Additionally, we have made significant progress in our DART trial, an observational study designed to demonstrate the clinical validity of cell-free DNA in detecting rejection in kidney allograft recipients. The study is also designed to demonstrate the correlation of circulating cell-free DNA through renal function estimated from serum creatinine.

We initially planned to enroll 200 patients and more than 12 centers and collect patient blood samples. We exceeded plan with 205 patients enrolled by December 31, up from 100 in the third quarter in 30 transplant centers, up from 11 reported into three. In total, these centers have already collected over 900 samples and associated clinical visit data as of March 19, 2016.

We plan to deliver a first analysis in the first half of this year with the timing primarily driven by the number of patient samples that are associated with clinical events, especially rejections. Following this first analysis of the DART study, we plan to begin a clinical trial called ROSE in the second half of this year. The focus of ROSE will be to demonstrate clinical utility in support of reimbursement in a Medicare population. Medicare covers more than 90% of kidney transplantations.

We continue to be on track with our development plan. These milestones are consistent with previous communications.

In addition to DART, we have two more clinical studies underway, our Outcomes AlloMap Registry Study, or OAR, and our cell-free DNA AlloMap Outcomes Registry, or D-OAR. Enrollment continues to grow in the OAR study. At the end of 2015, we had taken almost 3000 samples up from 2300 at the end of the third quarter from 800 patients up from about 600 last quarter from 24 centers.

The long-term outcome data collected will continue to build clinical evidence for the use of AlloMap. We see this not only as a long-term commitment to the field of transplantation but also as an invaluable source for future scientific insight generation.

We are seeing a lot of interest from opinion leaders to use this data to gain further insights into patient management.

We continue to make cell-free DNA results available from our CLIA lab laboratory in combination with AlloMap through our D-OAR registry. As a December 31, the D-OAR trial was in 18 centers up from 15 at the end of the third quarter with 340 patients enrolled up from 250 and 900 samples collected up from 650. This effort continues to support evidence generation of cell-free DNA in organ transplantation.

We continue to build an invaluable repository of well annotated samples that link genomic data with clinical information.

Now turning to our second strategic initiative, which is to increase the adoption of AlloMap, our surveillance solution for heart transplant recipients. Out of the 130 heart transplant centers in the US, AlloMap was used in 120 during the last 12 months. As of the end of the fourth quarter, there were 64 centers with established AlloMap protocols up from 62 in the previous quarter and 60 in the quarter before that.

During the fourth quarter we hit an important commercialization milestone in Europe with our partner, Diaxonhit, a French leader in specialty in vitro diagnostics, we completed the technology transfer of AlloMap into Strasburg University Hospital Central Immunology Laboratory, HUS in France. We established a rigorous multi-step validation process which demonstrated that AlloMap test results released from the HUS Laboratory are equivalent to AlloMap results generated by our laboratory here in Brisbane.

Patient samples can now be tested at HUS. This unique partnership with both a prestigious university-based laboratory and a strong commercial organization increases the availability of AlloMap for transplantation in Europe.

I am also pleased with the execution of our commercial strategy which coordinates AlloMap patient customer engagement, drives establishment and adherence to protocols and supports transplant centers in optimizing their workflow. The three key initiatives that we have been working on are stakeholder engagement to involve patient and physicians in the direction we take our technology, clinical data and education to continue to build the evidence in support of AlloMap and protocol development and adherence to continue to expand the utility of AlloMap.

A highlight of our ongoing development efforts is our recent release of AlloMap's score variability, or AMV, as an additional tool for heart transplant clinicians. In October, research conducted on AMV was published in the Journal BMC Cardiovascular Disorders. This published study is the first to report on positive and negative predictive values key to informing tests used in a patient population. The AlloMap variability assay identifies which patients are at risk of future clinical events thereby facilitating adjustments of patient management strategies. In other words, AlloMap variability predicts risk of future allograft events, while each (inaudible) of AlloMap identifies the risk of acute rejection at the time of testing.

This is a particularly exciting area for patients that are in the timeframe two to five years post transplant. AMV, which is available from four AlloMap test results within a 24-month period will provide additional insights to clinician for patient risk stratification. There are now 40 centers receiving AlloMap variability scores, up from nine in the third quarter of 2015.

On the reimbursement front, we continue to have positive coverage decisions from most major carriers. As of December 31, 2015, we had been reimbursed for approximately 80% of all AlloMap results delivered in the 12 months ended June 31, 2015. And just a few weeks ago, we announced TRICARE National Insurance came out with a positive coverage policy for AlloMap. TRICARE covers over nine million lives and is part of the military healthcare system. This coverage is retroactive back one year to February 2015.

AlloMap continues to be broadly reimbursed in comparison to other high-value molecular diagnostic offerings. In 2015, AlloMap reimbursement was steady at $2821. In 2015, we received a CPT code as we are currently going through the CMS gapfill process with AlloMap, we expect reimbursement to remain at this price going forward.

On July 1, we brought AlloMap billing and collection activities in house. As we grow and launch new tests, we expect to see a reduction in cost of the reimbursement effort and an increase in effectiveness through direct control over the entire process. As mentioned earlier, we think about this as a core competency of a pioneering molecular diagnostic Company.

Now moving on to our external growth opportunities. As most of you are aware in December we reached an agreement to purchase 78% of the outstanding share of Allenex. We are currently working through the conditions of closing.

Allenex is a transparent transplant diagnostic company based in Stockholm, Sweden that develops, manufactures, markets and sells products that match donor organs with potential recipients prior to transplantation. We anticipate to finish the tender offer period with Swedish stockholders and expect to complete the acquisition in mid April. This combination will create an international transplantation diagnostics company with expanded distribution and additional overall growth potential.

Let me tell you why I am excited about Allenex. Their Olerup SSP line, which addresses human leukocyte antigen, or HLA testing, is used to match transplant recipients with donor organs. The Olerup SSP line is established in the marketplace and is complementary to our product. The majority of Allenex operations are in Europe which represent 70% of the 2015 revenues. They have five direct reps in Europe and five in the US. Their team is very knowledgeable, talented and well-respected. The Olerup brand is very well known in the field and important relationships have been established over decades.

Pro forma combined revenues for 2015 were approximately $44 million. This represents a unique strategic fit with little overlap between our standalone companies. Combined, CareDx will have product offerings along the pre-post transplant continuum and presence and direct distribution channels in the US and in Europe.

We are excited about this combination and look forward to sharing more with you at an analyst and investor's day that we are planning to host in mid April in New York.

Before we move on to financial, I would like to speak a little bit more about striving to be a best-in-class transplant focused molecular diagnostic Company and how we strengthen our organization by bringing on great people.

As an example, for an incredible team that we have currently in the Company and that we are building, in the beginning of 2015, Dr. John Sninsky joined us as Chief Scientific Officer to head our product development initiative. Dr. Sninsky is an expert in the diagnostic space with a wealth of expense. He has made significant contributions leading us through the product development milestones we hit this year and we expect more to come.

Now I will turn the call over to Ken.

Okay. Thanks, Peter. AlloMap revenue for the full year 2015 was $27.9 million, up about 8% over 2014. AlloMap volume growth was up 10% for the year. AlloMap revenue in the fourth quarter was $6.7 million, flat with the fourth quarter of 2014. Revenues would have been higher but for a delay in collections of cash basis tests from our former billings and collections vendor.

As Peter mentioned, in July we transferred this activity to an in-house team but the prior vendor remained responsible for following the collections on the tests performed through June. We have now also taken over collections on those tests performed prior to June and expect to collect on a number of these tests and recognize this revenue in 2016.

Based on the prior collection history, we estimate that we will recognize approximately $500,000 to [$800,000] in revenue from these tests.

Collaboration revenue was also lower than a year ago. I would remind you that in the fourth quarter of 2014 we had a $1.1 million payment due to the winding down of a partnership with LabCorp which affects comparability to this quarter. In addition, we have decided to change the revenue recognition from accrual accounting to cash revenue recognition for the regular ongoing royalties we receive from a technology license.

As a result of this change, we reversed the third quarter's revenue that we had previously recognized and will not recognize the fourth quarter's revenue until it is actually paid. This amounted to approximately $200,000 in the fourth quarter of 2015 and the reversal of $86,000 from the third quarter of 2015.

Cost of testing in the third quarter was $2.5 million compared to $2.2 million in the fourth quarter of 2014. This translated to a gross margin of 63%, in line with recent performance but down from the fourth quarter 2014 performance of 67%.

R&D expense was $2.7 million in the third quarter -- in the fourth quarter rather -- compared to $1.3 million in the fourth quarter of 2014. The change reflects an increase in all clinical trial activity especially the cell-free DNA clinical area which did not exist last year and an expanded R&D effort in general.

Sales and marketing expense for the fourth quarter were $1.9 million compared to $1.6 million in the fourth quarter of last year. This increase was primarily related to an increase in marketing programs.

G&A expenses were $3.7 million for the quarter, up from $2.3 million in the fourth quarter of 2014. As discussed earlier, we brought billing and collection in-house this year which will reduce expenses starting in 2016 after a transition period during which we ran our old outside service and our in-house activities in parallel. In addition, expenses related to the acquisition and those accounting fees contributed to the increase year over year.

Fourth quarter 2015 net loss was $4.8 million compared to a loss of $5000 for the same quarter in 2014. Basic and diluted loss per share of $0.40 in the quarter compared with break even EPS numbers in the year-ago quarter. Remember in the year-ago period the beneficial $1.1 million one-time payment from LabCorp boosted the bottom line significantly.

Shares outstanding for this year's quarter were 11.9 million compared to 11.8 million a year ago.

Turning to the balance sheet at the end of the fourth quarter, we had $29.9 million in cash and cash equivalents versus $36.4 million at December 31, 2014.

Given the proximity to the closing of the Allenex acquisition and how it will affect the size of CareDx, we will not be providing 2016 financial guidance at this time. However, we plan to discuss our outlook for 2016 at the analyst and investor day in mid April after the Allenex deal closes.

I will now turn the call back to Peter for a few closing remarks.

As we are closing on 2015, we are also turning the page by announcing a CFO transition. We announced today that Ken will be leaving the Company and Charles Constanti will be joining us as CFO. I am thankful to Ken for his partnership in the last two years. He was instrumental in guiding us through the IPO process. He has also been a terrific travel companion and I will miss him. I am pleased that Ken has agreed to remain with the Company until June to ensure a smooth transition.

With Charles Constanti, we are bringing a seasoned financial expert on board that will allow the organization to realize its future growth aspirations. Charles brings with him a lot of international finance and accounting expertise, which will be important as we close and integrate the Allenex acquisition. I am looking forward to working with Charles. He will be a great addition to the team.

In summary, I am delighted by the progress we made throughout 2015 and into 2016 as we move towards advancing our mission to improve patient outcomes in transplant care.

Our key objectives for 2016 are develop AlloSure into a commercial product for kidney transplant patients; integrate Allenex and further build out an international diagnostics company focused on the transplant continuum; continue to grow AlloMap, our core product in transplant medicine. We look forward to updating you on our progress at her upcoming investor and analyst eight mid April and on future calls.

With that, I would now like to open the call up for questions. Operator?

(Operator Instructions). Bill Quirk, Piper Jaffray.

Hi, everyone, this is Laura Sand on for Bill. First question, regarding the CFO transition, I guess why is not the right time for the change?

Well so this is Ken speaking, and I have just decided that I am going to rebalance my life a little bit. I am not leaving for any particular future position or occupation. But I told Peter that I wanted to rebalance a little bit and that gave everybody a enough time to allow for a smooth transition.

Okay, thank you for the clarity. And then with the Allenex deal closing in mid April, how are you looking at topline synergies? And also what is your strategy for the timing of the integration process?

Perfect, Laura, thank you so much. And obviously we are in the midst of finalizing the transaction middle of April as you said and then swiftly going into the integration process. We really see there are two synergies for the business. On the one hand we have a very strong established US presence with CareDx. We have access to 130 transplant centers that we regularly call on.

To give you a bit of an understanding, the Allenex organization is really relatively young in the United States with a presence in West Chester, Pennsylvania. So we think there will be cross-selling opportunities on the long run. There is a slightly different call point as we are calling onto a transplant center more from the clinical and the coordinator perspective and they are calling on the lab heads. But more and more we see these centers are coming together with lab directors and clinicians are sitting around the table talking about individual patients.

And then on the other hand, we have the Europe presence of Allenex. They have a very vast distributor network all over the globe. And we believe that with our growing products, see AlloSure and others, we can build that presence out on the medium to long term. So don't expect immediate revenue synergies but on the mid- to long-term, there is clearly a benefit of being a global transplant business because transplantation is a pretty global business.

Great, thank you.

Dan Leonard, Leerink Partners.

Yes, this is actually Mike Sarcone on for Dan Leonard. So it looked like the AlloMap volumes declined sequentially in the quarter. Do you think maybe you can kind of elaborate a bit on that and talk about what you were seeing there?

Yes, I think what is very important, Mike, is that we measure our business more on quarter versus previous year quarter. And you see healthy growth in the AlloMap franchise of 8% in terms of volume growth. When you look at revenue recognition, I think Ken was outlining the lack of the revenue recognition because of the transition of the billing process. But in terms of underlying volume growth, you see that we have been for the year growing 10% and in the quarter 8%. So I think it is a healthy growth for AlloMap given where it is in the lifecycle.

We continue to be successful and very excited around AlloMap variability, which I would consider being like a lifecycle management activity for the product. And we continue to have a few holdouts especially in the Northeast that we hope to penetrate going forward. So that will continue to drive AlloMap volumes in the future.

Okay. So nothing really to call out with the sequential declines because we haven't really seen that in the Q4 in the past.

Now you know our business very much driven by the number of working days and the number of days that patients come in to see clinicians. And given the low numbers, having two working days more or less makes actually a big difference. But in overall, look at it from a quarter over previous year quarter growth which is the 8% growth.

Understood, thanks. And my second question, can you give us an update on the QTYPE product launch? I know you guys had some centers testing the kits. Can you comment on initial feedback?

Yes, I would like to reserve that comment until we have concluded the transaction. Please bear with me that we -- given where this is today, we will only comment on this once we have closed the transaction, Mike.

Sure, thanks.

Paul Knight, Janney Montgomery Scott.

Well first of all, I enjoyed working with Ken so I am sorry to see the transition in some ways. So thanks to Ken.

And then my question would be on the volumes, I mean you had 8% year-over-year in 4Q, 10% revenue growth for the year. You are not providing guidance on 2016 but I guess what you are implying is that the trend in 4Q seems visible. Is that a fair assumption?

The trend in Q4 is visible, Paul?

Well, the Q4 volume growth of 8% and I guess we should assume that 2016 outlook for volume growth is unchanged.

Yes, yes, that is right.

And then regarding data, I know you are looking maybe as soon as June on additional AlloSure data. Are you still with that, Peter?

Yes, absolutely. No, we are right online. It is in line with previous communication, DART trial is on course, super excited with the 13 centers end of December. There might be one more center in the first quarter coming in but we are well ahead in terms of a first analysis in the first half of this year. And in previous communication, we always mentioned in June there is the American Transplant Congress which is an important date for us as a Company.

And then I know there is a chance that the CMS may reimburse patients in these trials under the early innovation program. Are you still -- is that still a possibility, Peter?

Yes. No, the ROSE trial as we are combining this and thinking about it, this initiative under coverage under data development that Palmetto is spearheading in the US, I think our trial or our products will be uniquely positioned for that. It is granted by Palmetto so it is not something that the Company would apply for but it is granted but we think it is a unique offering for transplant patients. And it lends itself to such a program. So we are hopeful for this coverage and the data development program.

Do you think that coverage is 2017 or is it this year kind of coverage or can you tell?

Well, I think it really depends on, Paul, on the read out of the clinical trial data of DART. We will need to build the case that clinicians are using the product and feel comfortable on using the product to -- as changing something in the patient treatment algorithm of these post transplant surveillance patients. So I think as soon as we know on the DART trial, that will give us a very strong handle.

But keep in mind we have very strong academic data in the past. We also have some analysis performed on heart transplantation. So we will have a basket of clinical data available for Palmetto and others to make the decision on how this trial should look like and how should we think about outcomes in these transplant patients.

ROSE will be focused on how do we get reimbursement for AlloSure. Because it is a clinically, analytically valid -- sorry, it is an analytically validated test that is available as of today here in our Brisbane lab.

Okay, thanks.

Eric Criscuolo, Mizuho.

Good afternoon. I guess echoing Paul, Ken, enjoy your future endeavors there.

Thank you.

You're welcome. Pleasure working with you. And I guess can you -- about the billing issue that you had as far as the collections as you moved to in-house collecting, I think you brought that that whole service inside CareDx in July. So why did that kind of affect you now versus when you first brought everything in-house?

Yes. Well, in the -- at the start of that, the Medicare payments come in and they are at least half of our revenue. And I mean everything seemed to be going okay in the July through August, September timeframe. And then we realized about November that things were slowing down. So we took a couple of actions and we finally decided to take over direct supervision of collecting those tests. So we actually hired the team leader from that vendor to head up our effort here to recoup those payments.

But there is -- these tests are collected actually, the cash collections the Medicare payments come in in 45 days but these cash collected tests can take 6 to 9 months to collect the majority of them. So there is a long tail on the cash collections.

Got you, okay. And you are pretty certain though that you will collect pretty much everything that you have been waiting for?

Yes. We have -- the figure we gave you has been scrubbed down and filtered quite a bit from all the potential tests. So we are trying to get to a realistic number of what we think is collectible, you know, based on what has been collectible in the past from the same insurance carriers.

Got you, okay. Thank you. And I guess if you can just talk about Allenex maybe and how they fit in the competitive landscape versus other (inaudible) typing companies and kind of where you think they are and maybe where they can go in that whole business?

Yes. No, I mean overall we built a clinical diagnostic company with a focus on transplantation. We have a strong presence in the post transplant heart with AlloSure. We enter all post transplants, all the organ testing and now with Allenex we add a pre-transplant component with a focus on HLA matching. What glues all of this together is the advances in clinical diagnostics with NGS Solutions and the push for personalized medicine.

I think we need to do a better job in identifying patients that benefit from extremely costly procedures and then optimize their treatment. And transplantations are among the highest cost patient, it makes perfect sense to start there. But with Allenex now we have a pre-post transplant continuum and will be a formidable competitor in that space that is currently dominated by one Company which is One Lambda, which was two years acquired by Thermo Fisher.

So I think we have a unique product offering now that we can have clinicians and lab directors think of CareDx as helping them to manage these patients on the pre-post transplant continuum, something that we do with our clinical expertise and we expect that there will be a lot of excitement around that space.

And how much bigger is One Lambda versus Allenex?

You know they have multiple offerings so think of them as $100 million, $150 million revenue type of company.

Okay, thank you. And then just lastly, AlloSure reimbursements. Have you started conversations with payers and maybe kind of give an update on where you stand there?

Yes, Eric, it is a great question. You know what is unique and special about transplantations especially kidney transplantations, 90% of transplantations or these kidney transplantations are actually Medicare patients because they have -- most of them have undergone dialysis previously and by the time they get transplanted they are Medicare patients.

So having reimbursement for Medicare is the sole focus for us as an organization to make this successful. Now in the past, the MolDX program actually has been advancing reimbursement in these novel diagnostic tests because they have capabilities and individuals that believe on this good clinical data driving better informations going forward. So we have had excellent relationships that we have established over years with the AlloMap reimbursement given the value proposition of our product and our Company.

So there is very close ties to experts in the field of reimbursement of multi-molecular diagnostics. And we believe we can leverage this into the AlloSure program.

But keep in mind that we are all about evidence and we believe we need to do the clinical trials to demonstrate the evidence to get the product reimbursed. The DART trial is a substantial undertaking, the [DIOR] trial is very substantial and will drive clinical information and evidence that makes it easier for a payer to say, yes, that is truly valuable for transplantations and reimburse the product.

So I guess you have to wait for those results to come through before you submit some kind of full dossier to Medicare?

Yes. I think it is very important this is all data-driven and evidence-based and we believe in that. And we have very strong analytical validation data which we will share. We now add clinical validation data to that.

And then there is a question about how do we think about use of the test and what is the right time of reimbursement. So we don't think of this as just such a step function but actually as we grow in evidence development, there is the right time of de-reimbursing this product. This coverage under data development might be a good compromise of having early reimbursement but still continue to build evidence for using the test.

Great, thank you very much.

Carolina Ibanez-Ventoso, Janney Montgomery.

I only have one question left. We know that you have a busy year ahead of you but can you share with us any steps the Company is going to take this year towards developing your bio informatics platform? Thank you.

Carolina, thank you so much for that question because it is really the mid- to long-term strategy for the Company. As we think about patient management and transplant surveillance, it really starts linking the HLA data pre-transplant together with the post-transplant surveillance data. And for that, we need to have a bio informatics platform.

We have been making excellent progress on establishing web portals with these 130 transplant centers. Some of them are now ordering AlloMap online and we actually play back the AlloMap results back into these centers. And we are thinking about even integrating the AlloMap results into the electronic medical record.

We have built relationships with next-generation sequencing data and cloud computing organizations to really form out this bio informatics network. This is something that will take a couple of years to develop. John Sninsky and his team are actively pursuing that. But we are very excited about building a bio informatics platform that also links back external data bases such as UNOS into this continuum.

We continue to believe that our diagnostic tests are the revenue generator and so our revenue model will be linked to the testing revenue. But ultimately what is driving use of our tests will be data that we are providing back to the clinicians for decision-making and providing this data in a better form will be very, very important going forward.

Thank you.

Thank you. And this does conclude the question-and-answer session of today's program. I would like to hand the program back to Peter Maag for closing remarks.

Well thank you very much for spending Thursday afternoon and evening with us. We are very much looking forward to continuously updating you in the future. Thank you very much for joining us.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.