CareDx Inc (CDNA) 2019 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to CareDx Inc. First Quarter 2019 Earnings Conference Call. (Operator Instructions) It is now my pleasure to introduce your host, David Clair. Thank you. You may begin.

Good afternoon, and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended March 31, 2019. The release is currently available on the company's website at www.caredx.com. Peter Maag, Chief Executive Officer; and Michael Bell, 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. CareDx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or other forward-looking statements whether because of new information, future events or otherwise. This conference call contains sensitive information and is accurate only as of the live broadcast today, May 8, 2019.

This call will also include a discussion of a financial measure that is 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 Peter.

Thanks, David, and good afternoon, everyone. We had another exciting quarter at CareDx as we continue to accelerate our leadership position in transplantation diagnostics. Our first mover advantage gives CareDx a considerable speed, and we are strengthening our platform every day. In March, we announced a partnership with Cedars-Sinai to study the use of AlloSure to characterize the response to therapy with an Interleukin-6 agent, tocilizumab, as a treatment for patients with antibody-mediated rejection. Also in March, we announced the clinical validation of AlloSure use in heart transplantation, which was published in the American Journal of Transplantation. This study is the first large perspective multicenter clinical validation showing the ability of our AlloSure-Heart testing service to detect acute cells, mediated and antibody-mediated rejection in heart transplant recipients.

In late April, we announced an agreement to acquire OTTR Complete Transplant Management, the leading provider of transplantation tracking software, which is currently used in over 60 of the leading solid organ transplant centers in the U.S. Importantly, OTTR software will simplify the transplant center workflow for ordering AlloSure and AlloMap.

The addition of the OTTR team increases the CareDx value proposition to transplant centers, enable the EMR integration of our surveillance solution and the ability to manage patients longitudinally. It also provides the backbone to build artificial intelligence tools for providing care pathways. I am pleased to confirm that the brand actually closed yesterday and that we are excited to welcome the OTTR team to CareDx, and we expect a seamless integration.

Just last week, we announced an exclusive inlicensing agreement with Alex Loupy and his Paris-based team from Cibiltech. Alex is the leading transplant pathologist in the field of machine learning and artificial intelligence. We had built a strong relationship over the years with Cibiltech, and we are excited by this group's work. Cibiltech's Predigraft, data analysis tool, represents the start of being able to use data to stratify transplantations based on the risk for long-term outcome. Besides the Predigraft tool, we are equally excited to be able to closely collaborate the brainpower of this team. We see this as only the beginning.

Let me stop here and provide some context on how this all fits together. Over the last 20 years, we have been dedicated to transplantation. We have been a trailblazer developing proprietary clinical biomarkers and successfully navigating the reimbursement landscape. We are now setting the bar for multi-modality testing combining our know how of gene expression and next generation sequencing-based technology. Our goal is to add smart analytics and machine learning to provide artificial intelligence solutions in transplantation. You will hear us talk about AITC, which stands for artificial intelligence in transplant care.

Our large clinical data sets collected through our registry studies will provide caregivers with point-of-care decision-making support tools that allow them to stratify their patient population. Our strategy to provide precision medicine tools with high-value diagnostics to a highly complex and costly patient population is coming to life. The first example of our multi-modality testing was our HeartCare solution. HeartCare combines both AlloSure heart and AlloMap, rendering a higher position assessment of the heart allograft then either test alone.

In early April, the reception to HeartCare was strong at the International Society for Heart and Lung Transportation, and we remain excited about the benefits of combining these tests for the heart transplant patient community.

The logical second example of our multi-modality testing is kidney care. Kidney care combines not only AlloSure and AlloMap kidney, but also adds Cibiltech's data analysis tool, Predigraft. We will launch kidney care at the American Transplant Congress in Boston in a few weeks' time. We are very excited as this marks the next step in providing insights into organ injury, immune quiescence and also provides the prognostic element of allograft survival at 3, 5 and 10 years.

Now turning back to execution in our performance. Another aspect of maintaining our substantial lead in the industry is to ensure that the race is a fair contest. Along these lines we will vigorously defend our intellectual property and our good name from inappropriate conduct from potential competitors. We are the leader in heart and kidney transplant surveillance, and we continue to fortify our competitive mode. We are on our way to lung transplant surveillance and we don't intend to stop there as we have a global presence with our transplant product.

For the first quarter of 2019, total revenues grew 85% to $26 million compared to the year-ago quarter. AlloSure, AlloMap and our products business all contributed to this growth. Growth in the quarter was broad-based with testing service revenue up 103% and product revenue up 34%, reflecting continued traction in this market segment of transplantation.

Turning to numbers on AlloSure. During the first quarter, 101 centers provided AlloSure results to their transplantation. We estimate these 101 centers account for approximately 60% of the transplant volume in the United States. CareDx provided 5,710 AlloSure results in the first quarter to approximately 4,300 kidney transplant patients. Since launching AlloSure in October 2017, we have provided results to over 8,000 patients, which equates to approximately 4% of the total number of living kidney transplant patients. Demand for AlloSure remains broad and includes both patients who recently received a kidney transparent as well as patients that receive their kidney allograft in previous years. Overall, reimbursement in the first quarter was consistent with previous quarters with 70% to 80% of our AlloSure volume attributed to Medicare patients.

We finished the first quarter of 2019 with 3,644 surveillance patients. We define surveillance patients as patients that are managed by CareDx on a predefined transplant center testing protocol. These 3,644 surveillance patients help build the recurrent revenue effect of AlloSure. We continue to make progress in rolling centers and patients in K-OAR, our kidney outcome AlloSure registry. Having surpassed over initial 1,000 patient enrollment goal, as of the end of March 2019, 50 centers have been initiated as pay or study sites and 1,006 patients have been enrolled.

Recall that in the K-OAR study, we target 75% adherence through our AlloSure surveillance protocol. Multicenter studies like K-OAR widen our mode in transplantation, as these studies provide us with additional touch points that transplant vendors and keep us in direct dialogue with the key innovation hubs and opinion leaders. These studies also drive compliance and adherence to standard protocol, which is crucial elements to our work in the transplant community.

I would like to take this moment to mention Dr. Jim Yee, our Chief Medical Officer, after an extremely successful career at CareDx, Jim has decided to retire from his full-time role as a physician to an adviser for CareDx at the end of the quarter. During his 13-year tenure at CareDx, Jim was instrumental in developing and executing our MS CARGO II, DART, D-OAR, and K-OAR, has launched AlloSure and HeartCare, participated in hundreds of conferences and speaker events and joined thousands of clinicians' conversations. All of which have led to tens of thousands of patient results. I'm extremely sad to see Jim move on but honored to have shared this transplant patient journey together.

With the success of Jim and the team on our K-OAR study, an unrivaled peer-reviewed publication together with our transplant center partnerships, which accounts for over 60% of the kidney transplant performed in the U.S., our EMR integration initiative and our new multi-modality solutions we are adding to our formidable mode around kidney transplant patient care.

Now shifting to our heart transplant surveillance solution, AlloMap. First quarter 2019, test volume increased 11% year-over-year, translating into 4,280 patient results, with the adoption of HeartCare accelerating volumes in the quarter. This novel heart transplant surveillance solution combining both AlloMap and AlloSure-Heart is resonating with the transplant community with both physicians and patients appreciating the comprehensive view of the health of the heart allograft enabled by HeartCare.

Our Surveillance HeartCare Outcomes Registry, or SHORE study, continues to be well received by transplant cardiologist, and we have recruited 9 centers to date. I'm also very pleased to report from April AlloMap is in-network for all of Anthem network of plans across the U.S. Anthem is one of the nation's largest payers with approximately 40 million members and AlloMap is now a covered test for approximately 80% of all insured lives in the U.S.

Now turning to our transplant lab product. Our HLA typing product are used in labs throughout the world to help determine which organ or bone marrow are a transplantation match between the donor and recipient. Our first quarter product revenue growth was 34% contributing $4.4 million to our revenue in the quarter. Growth was driven by continued traction of TruSight HLA and QTYPE. We remain on track to fortify our product offerings with the introduction of new AlloSeq next generation sequencing product in 2019: AlloSeq TX for HLA typing, AlloSeq cell-free DNA kit and AlloSeq BMT for bone marrow transplant testing.

With the addition of OTTR, our patient engagement model is expanding. CareDx remains the leading provider of high-value transplant surveillance solution and have added capabilities to manage patients longitudinally and further impact long-term patient outcome. Today, we care for approximately 4% of the U.S. kidney transplantation population. This is a great start as the need for organ transplantation is ever-increasing.

Mike, I'll hand the call over to you to discuss financials.

Thank you, Peter. Turning first to the income statement, our first quarter 2019 testing services revenue increased 103% year-over-year to $21.5 million. The significant growth in testing services revenue was primarily driven by the 5,710 AlloSure patient results we provided in the first quarter. Growth also came from the 4,280 AlloMap patient results we provided, which was an 11% increase compared to the prior year quarter. Our first quarter product revenue increased 34% year-over-year to $4.4 million and as such, total revenue for the first quarter of 2019 was $26.0 million, representing an 85% increase compared to the prior year's $14.1 million.

For the first quarter of 2019, the net loss was $7.5 million compared to a net loss of $9 million in the same period of 2018. Our net loss per share was $0.18 for the quarter compared to $0.30 in the first quarter of 2018. Our first quarter 2019 net loss included a $6.1 million stock-based compensation expense and a $3.0 million loss from the change in estimated fair value of common stock warrant liabilities.

For the first quarter 2019, our non-GAAP net income was $2.2 million compared to a non-GAAP net loss of $4.0 million the same period of 2018.

Our non-GAAP net income per share was $0.05 for the quarter compared to a non-GAAP net loss per share of $0.14 in the first quarter of 2018. As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization, other expense and net loss attributable to noncontrolling interest. For the first quarter of 2019, adjusted EBITDA was a gain of $1.8 million compared to a loss of $3.2 million in the first quarter of 2018. While this marks the third consecutive quarter of positive adjusted EBITDA, we will be modestly further increasing our operating expenditures as 2019 progresses to further enhance our leadership position in transplantation.

Cash and cash equivalents at March 31, 2019, was $57.4 million compared to $64.6 million at the start of the quarter. Net operating cash flow was negative $5.9 million in the first quarter of 2019. The operating cash outflow in the quarter was primarily related to annual incentive compensation payments for 2018 performance that were paid during the quarter. We continue to expect positive operating cash flow the full year 2019.

As Peter mentioned, yesterday we completed the acquisition of OTTR Complete Transplant Management for $16 million. The transaction has been funded with cash on hand and we expect OTTR revenue for the full year 2019 to be in the $6 million to $8 million range or $4 million to $5 million from May through December with net income anticipated to be breakeven.

Turning to guidance, we are updating our 2019 revenue expectations to reflect the continued growth of AlloSure and anticipate $130 million to $150 million for the year, including $4 million to $5 million for the OTTR acquisition.

With that, I will open the call for questions.

(Operator Instructions) Our first question comes from the line of Bill Quirk with Piper Jaffray.

So I guess first question is should we expect to see data on kidney care at the upcoming meeting here? Or when might this be released?

I think we have very strong data packages, obviously, on AlloSure. So Predigraft data is readily available, because Alexander Loupy and the transplant team in Paris have actually published extensively on iBox as it was called before.

On AlloMap kidney, I think there is a bit of a surprise waiting, and we are very excited about also applying the gene expression profiling technology to the field of transplantation. This will be initially launched as a combination of the 3 and launch out probably in what we always do in form of a clinical trial making that available to transplantation and clinicians on a trial basis.

Understood. And Peter would you be seeking out any additional reimbursement for the combination of the 3? Or how should we be thinking about that?

No, I think we have been talking about AlloSure's really the driver for the company in the short term. I think we are building out a strong mode in transplantation. The reimbursement strategy has not been made out. As soon as we have laid out the strategy on the reimbursement side, which will be predominantly, again, focused on Medicare reimbursement will be communicated to The Street.

Okay, great. And then just last one from me, just thinking a little bit about your strategy from earlier, I think, you brought it up on the fourth quarter call, when you get deeper with your existing accounts versus necessarily just adding new accounts just for the sake of adding them. Does the new kidney care, has that changed the strategy at all? Maybe make it essentially kind of by modal or are you going basically in both directions deeper as well as broader?

Thank you very much, and good question. And no, I think you are seeing we are now in this quarter in 101 centers, 101 centers, which is completely confirming our strategy. We also see our full kidney care, the same strategy play out, it's going deep into these transplant centers where we have an established presence and there is a lot of opportunity for us to converting these centers into surveillance testing. So I think our strategy continues to execute against the path that we laid out. There is no change to the strategy. The strategy is working.

Our next question comes from the line of Brandon Couillard with Jeffrey's.

Peter, I would actually like to start with AlloMap, the 11% volume growth, been a while since we've seen that business do double-digit growth. Could you perhaps spike out or sort of quantify the impact from HeartCare and perhaps the breadth of users in terms of docs or centers that have ordered? And then did that change at all how you're thinking about AlloMap growth for the year relative to sort of the mid-single digit assumption that you have in there for '19?

Brendon, excellent question. I think HeartCare is really changing the paradigm in heart transplantation and the excitement that we felt in the ISHLT Congress was palpable. This was great to see. We actually see the number of centers that have adopted SHORE our registry study but it's exceeding our expectations. And the primary driver for the growth in the first quarter however, was actually a bit of a slow quarter the previous year, so we had a few days out with heavy, heavy storms in the Northeast that were leading to a bit of catch up in the second quarter last year. So we continue to be modeling AlloMap in this mid-single digit range. We obviously, are happy about the double-digit volume growth for this quarter, but I think we continue to look for a mid-single digit volume growth for AlloMap.

Excellent. A couple on the OTTR and iBox deals. First on OTTR, how long do you think it will take for you to sort of to be able to build in direct ordering functionality for AlloSure and AlloMap? And then on iBox, is this something that would ultimately sort of require an FDA approval? Or is this sort of a feature or data, incremental data that you could just drop into the AlloSure test results?

Both excellent questions. I think on the OTTR, there are obviously, easy drop-ins for a few centers. I think it will take quarters and quarters for us to adopt AlloSure testing or AlloSure functionality or AlloMap functionality by a simple mouse click. In terms of some vendors it will be quick. The team is actually right now sketching up the strategy and we'll be updating you as we are progressing on having work through options through OTTR with AlloMap and AlloSure is really the low hanging fruit for us and that's the primary focus.

Longer term, I think it is great to monitor patients longitudinally make sure that there is adherence and compliance opportunity to increase that together with vendors, realizing that they're actually skipping a lot of the surveillance opportunities for these patients. In the longer term, there is the artificial intelligence option.

Shifting over to the regulatory and the reimbursement strategy for kidney care, I think we'll be launching kidney care and test the excitement of the transplant community at the American Transplant Congress and we'll be then informing about the reimbursement and regulatory strategy. That may include FDA, that may not include the FDA. At this stage, I don't think we have detailed that out yet.

Overall, I think it's a significant contribution to transplant patients having on the one hand, cells for DNA testing as an organ injury marker than having AlloMap kidney as an opportunity to measure immune activity. And then on the third leg would be allograft prediction in terms of how long does the allograft actually function, which is very exciting with the iBox. So this comprehensive concept multi-modality testing is very exciting for us.

Okay. And then one more for Mike. And then just in terms of the outlook for the year, should we expect, I guess, how should we expect operating expense to sort of trend sequentially from the first quarter over the balance for the year? And do you still expect positive EBITDA for the full year? And then I guess thirdly how will OTTR will impact the gross margins and operating margins?

Yes, Brandon, on the operating expense, if I look at it from a non-GAAP viewpoint in Q1, operating expense is about $16 million. I would say by the end of the year, in Q4, that operating expense would be about $21 million. So probably growing about $5 million. Increase being driven by OTTR expense about $1 million a quarter and the rollout of SHORE and the continued rollout of K-OAR and by the end of Q1 we'd filled out our sales and marketing team as we talked about previously and so we'll be getting the full expense for those over the next couple of quarters. I think though with our increased revenue guidance, we're still targeting to be EBITDA positive throughout the full -- throughout the year. And from a margin perspective, OTTR is going to be breakeven from an EBITDA perspective. So very, very small impact on gross margin and very small impact on EBITDA margin overall.

Our next question come from the line Per Ostlund with Craig-Hallum capital.

Congratulations to Jim on his well-deserved retirement. Want to start out with AlloSeq cfDNA. So Peter you guys are featuring this in some presentations at EFI this week. Assume that, that's a pretty good signal that you're very much on plan for the 2019 introduction. Have you started to sketch out your go-to-market strategy whether it's strategy in geographic areas of focus and that sort of thing and how much does the Allenex infrastructure from that acquisition help sort of grease the skit for you to get to market with that product?

Excellent question, and thank you, so much for saying that on the product. I'm actually today in Portugal at the EFI Congress and it's great to see -- to be together with our distributor network to be here with the team and see the excitement that AlloSeq cell-free DNA is bringing, obviously, everybody is looking at our success in the United States and what this could bring to the transplantations outside of the U.S. as well as we're adopting cell-free DNA testing. We are actuality launching 2 products. One would be the AlloSeq T7 -- TX 17, which is our HLA typing product for that market, very exciting, and then the other one is the AlloSeq cell-free DNA, which we will launch the same strategy in a way that we have done in the U.S. We will make sure that transplant vendors get their hands on a clinical study that we are getting them acquainted with the product and how to use it in a surveillance study and then inform very important around reimbursement. We don't think that this will be revenue relevant this year and it will take root mainly into the middle of next year in order to be revenue relevant. So this is our long product strategy for us, and we're very excited to be launching these products in -- very soon in this market.

Okay. Very good. Coming back to domestic, AlloSure in the kidney market. In terms of some of the competitive noise, I guess we'll call it, that's out there, have you, I guess, 2019 I think you well telegraphed as the year of building the competitive mode and you've established yourself in 100 centers and 101 ordered this quarter and the utilization seems to be ticking up very, very nicely. Is that -- is any competitive noise impacting ordering activity at current centers? Is it having any impact on the periphery of those centers that have yet to order AlloSure from you?

No, I think the answer is no. I do think that there is growing excitement and having someone else talk about cell-free DNA testing is not negative for CareDx. As we are the predominant provider of these solutions at this stage. There now a couple of companies out there that are making noise, which is just supporting our efforts as we are the solutions that is here and now. I do think we have a first mover advantage, and we are capitalizing on that first mover advantage. So right now I think this is the moment for us to continue to widen our mode in transplantation and we have a clear strategy and we're executing against it and this quarter will demonstrate that our execution is working really well.

Okay, last question for me and as a kind of a follow-up to Bill's actually related to kidney care still looking forward to that launch here coming up in a few weeks. Peter, did you suggest that, that would probably see something like a kidney version of SHORE essentially to get center adoption of the multi-modality testing?

If you have followed the company, we are really science-based and evidence-based and if we are bringing out new concept which is really an exciting concept of combining 3 very different approaches to surveillance of kidney patients, we would always do that in a responsible and scientific way and the right way to do that is to support the community with generating valuable clinical with a multicenter perspective initiative. As K-OAR are has been such a great success at more than 50 centers recruiting more than 1,000 patients, I think there's something to build on from K-OAR and that allows us to just continue to build scientific evidence how these novel biomarkers and now a digital biomarker in addition will potentially change our transplant clinicians and caregivers and caring for these patients.

Our next question comes in line of John Hsu with Raymond James.

If I could just start off with the guidance, the increase. It looks like with the $4 million to $5 million from OTTR that the raise was somewhere in the $3 million to $4 million range, I guess, organically or ex software. So maybe Mike or Peter if you could start with where you're seeing the strength in the business and what's really kind of driving the increase organically in the revenue guidance?

I'll let Mike talk to it as he is closest to the number. Mike?

Yes, John. I think the growth on the guidance, yes, you're right, roughly half of that comes from the acquisition of OTTR. The other is really being driven by our expectations on continued AlloSure growth. I think, again, for the quarter, AlloSure slightly exceeded our expectations, and so we increased the guidance to represent that. So yes, it's just continued acceptance of AlloSure.

Got it. And just turning to the K-OAR study, it looks like things are tracking pretty nicely there, but just based on the pace of patients that you've been adding, are you still targeting 1,500 patients? Because it seems like based on the pacing that would imply that it might extend a little bit longer than mid-2019?

We have originally talked about 1,000 patients to recruited by June this year and in a good fashion I think we over exceeded against this in a quarter early. Now with end of March that we have exceeded the 1,000 patient recruitment target. You're right that there -- it's probably the 1,500 will take some time. I think there will be some kind of set on most fully recruiting. So if you were at 50 centers and maybe there's here or there an additional vendor and they're all recruiting 30 patients. So it will be in this range between 1,400 and 1,500 patients and it will go beyond June, and we are in a way continuously seeing these centers being very excited about adopting the technology. Now there are some centers that actually who do want to gain additional insight. So we do have a few centers where we actually are increasing the recruitment from 30 to 50 patients or so and that's also an option. But we are extremely pleased with how K-OAR has really established the surveillance protocol in kidney transplantation, 50 transplant centers are now using the 7 plus 4 four plus 4 protocol, which in itself is a key accomplishment for the company.

Excellent. And then I guess if we could just stay on enrollment, if we just fast-forward a little bit on kidney care, clearly you said that there will be some incremental enrollment. So again, just thinking about the mode, I know most high-volume centers typically do call it a 100 or 150 or so kidney transplants a year of which these centers are typically looking to enroll up to 30 patients, right? The 50 centers on K-OAR. So is the right way to think about it that potentially you could reach another call it up to 30 patients in some of these centers. I'm sure there will be a lot of overlap once you roll out kidney care and the other registry study associated with that.

Our strategy always has been that we get transplant centers accustomed with the surveillance protocol through the K-OAR study, which is a study that we have discussed with Medicare to make sure that we have coverage on the data development. Now I think there is a broad-based adoption in many centers that have used AlloSure beyond the -- our surveillance protocol. I think the next study will really be based on how can we accumulate information based on these 3 data points that we are providing or at least 3 markers that we are providing, and so I think that's up to be defined and we'll probably talk about it following ATC and give you more guidance on that. But our goal is to substantially penetrate a number of centers this year and go really deep in as many as possible and get a lion's share of these 100 to 200 and sometimes even 300 kidney transplant patients per year.

Okay, great. That's very helpful. And then the last one for me, just thinking about the surveillance patients in the quarter, clearly you give a nice breakout last quarter of, it's really just kind of a combination of K-OAR patients plus first time patients plus maintenance patients and then a true-up for attrition. So I don't know if you could just ballpark, help us think about that. Obviously, the K-OAR we can get back into the math based on the patients added for K-OAR specifically, but can you just help us think about maybe the other 3 pieces associated with that number?

Yes, John, I think what we saw in this first quarter of 2019 was very similar surveillance patient movements as previous quarters. So the attrition, the attrition rate was, again, in that sort of 10% ballpark. The split between newly transplanted patients and the patients more than one year out was, again, similar to before, which was roughly around that sort of 60% in the first year. So yes, I mean, that led to an addition of approximately 800 new surveillance patients in the quarter.

Okay, great. That's really helpful. Sorry, just last one for me, how -- are we're seeing any movement on the renal care front in terms of Secretary Azar made some comments and then Peter, you alluded to last quarter just around some movement from a legislative level in terms of maybe just starting to increase the availability of kidney organs for transplants?

I think this is a very exciting development that there is very broad-based support of kidney issues in the current HHS setting and Azar is really spearheading a great momentum there. There hasn't come out something very specific yet but we do anticipate that something will come out within the next 3 to 6 months. I actually spent last week in Washington talking about the various issues around contribution of transplantation that we can do to the kidney field because it's clear that transplantation is actually cost-effective versus dialysis and so there is a lot of tailwind, so to speak. I don't think there that this will be relevant this year, but as we see transplantation gaining share and momentum I think increasing the donor population will be a long-term positive for us and this type of machines will be helping the company going forward as transplantation is an exciting field.

(Operator Instructions) Our next question comes on the line of Yi Chen with HC Wainwright.

My first question is, is the raised revenue guidance simply driven by the acquisition of OTTR, which has annual revenue of $6 million to $8 million or is it also driven by anticipated in higher-than-prior previous anticipated test volume?

Yi, thank you very much for the question. I'll hand over to Mike for the guidance.

Yes, Yi. The increase is roughly half is coming from OTTR. So that sum is $6 million to $8 million is for the full year for OTTR, probably for May through to December since the acquisition, we're looking at something liking at something like $4 million to $5 million revenue coming from OTTR. The delta for the increase in the guidance, which is about $8 million at the midpoint is coming really from AlloSure and for the continued expected growth of that.

Got it. Is iBox technology expected to add any revenue to the top line?

I think we haven't talked about the reimbursement and the regulatory path for the product. Right now, it is a concept. I would say kidney care really is capturing a concept similar to HeartCare, where we're combining AlloMap and AlloSure. Here, we don't expect right now for sure for this year are contributions from Predigraft, which is the iBox technology as a product for as a contribution for this year.

Got it. And how much impact should we expect from the inclusion of AlloMap in Anthem Blue Cross in the coming years?

I'll turn to Mike. I do think that we see this as a very positive that rather than battling every AlloMap reimbursement and going back and having negotiations and everything on AlloMap as a business. Now we are more than 80% under contract on AlloMap. So being in-network with Anthem is a key signal for transplantation issues and high-value diagnostics. And so we see the signaling effect as very important effect. Mike, did you want to add to that?

Yes, Yi. Anthem for AlloMap represents just under sort of 5% of the AlloMap volume. We've had a positive coverage decision from Anthem on AlloMap for several years. So we have been getting paid, of course, we've been getting paid on out of network basis and it takes a longer time to get paid the on out of network basis. So being in-network, it will improve the speed at which we get paid and the simplicity, but I wouldn't expect much of a revenue impact on that because, again, we've been getting paid over the last few years regardless.

Got it. And final question, is there an update regarding the litigations against Natera?

Nothing specific. We've -- those litigations were roughly a month ago. Natera still has time throughout the rest of this month in order to respond. So there's been no response yet, so no movement on it.

Thank you. Ladies and gentlemen, at this time there are no further questions. I'd like to turn the floor back.

Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.