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CareDx, Inc. (NASDAQ:CDNA)
Q1 2019 Earnings Call
May 8, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, ladies and gentlemen. And welcome to CareDx, Incorporated first quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press *0 on your telephone keypad. It is now my pleasure to introduce your host, David Clair. Thank you. You may begin.

David Clair -- Investor Relations

Good afternoon and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended March 31st, 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 assumption. 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.

Peter Maag -- Chief Executive Officer

Thanks, David. And good afternoon, everyone. We had another exciting quarter at CareDx as we continue to accelerate our leadership in transplantation diagnostics. Our first mover advantage gives CareDx a considerable lead. 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 respective, multi-center 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 US. 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, enables the EMR integration of our surveillance solution, and the ability to man a station longitudinally. It also provides the backbone to build artificial intelligence tools for providing care pathways. I am pleased to confirm that the branch action 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 end-licensing agreement with Alex Loupy and his Paris-based team from Cibiltech.

Alex is a leading transplant nephrologist in the field of machine learning and artificial intelligence. We have built a strong relationship over the years with Cibiltech. And we are excited by his group's work. Cibiltech Predigraft data analysis tool represents the start of being able to use data to stratify transplantations based on the route for long-term outcome. Besides the Predigraft tool, we are equally excited to be able to closely collaborate with the brainpower of his 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 multimodality testing, combining our know-how of gene expression and next-generation sequencing based technology.

Our goal is to add more analytic 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 tests 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 multimodality testing was our HeartCare solution. HeartCare combines both AlloSure Heart and AlloMap, rendering a higher position assessment of the heart allograft than either test alone. In early April, the reception to HeartCare was strong at the International Society for Heart and Lung Transplantation. And we remain excited about the benefits of combining these tests for the heart transplantation community.

The logical second example of our multimodality testing is KidneyCare. KidneyCare combines not only AlloSure and AlloMap Kidney but also adds Cibiltech's data analysis tool, Predigraft. We will launch KidneyCare at the American Transplant Congress in Boston in a few weeks' time. We are very excited, as this marks the next step in providing insight into organ injury, [inaudible] and also provides the prognostic element of allograft survival at three, five, and 10 years. Now turning back to execution and 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 moat. We are on our way in lung transplant surveillance.

And we don't intend to stop there, as we have a global presence that our transplants honor. For the first quarter of 2019, total revenues grew 85% to $26 million compared to the year-ago quarter. AlloSure, AlloMap, and our product 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 4,350 transplantations. 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 transplantations.

Demands for AlloSure remain broad and includes both patients who recently received a kidney transplant as well as patients that received 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 under testing protocol. These 3,644 surveillance patients helped build the recurring revenue effect of ours. We continue to make progress enrolling centers and patients in K-OAR, our kidney outcome AlloSure registry, having surpassed our initial 1,000 patient enrollment goal. As of the end of March 2019, 50 centers have been initiated as K-OAR study sites. And 1,006 patients have been enrolled. Recall that in the K-OAR study, we targeted 75% adherence for our AlloSure surveillance protocol.

Multi-center studies like K-OAR widen our moat in transplantation, as these studies provide us with additional touchpoints with transplant centers 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 element 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 fulltime year and position to an advisor 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, helped launch AlloSure and HeartCare, participated in hundreds of conferences and speaker events, and joined thousands of clinician conversation, 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 transplantation journey together. With the success of Jim and the team on our K-OAR study and unrivaled peer review publications, together with our transplant center partnership which account for over 60% of the kidney transplants performed in the US, our E&R integration initiative and our new multimodality solutions we are adding to our formidable moat around 50 transplantation 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 volume in the quarter. This novel heart transplant surveillance solution combining both AlloMap and AlloSure Heart is resonating with the transplant community with both decisions 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 cardiologists. And we have recruited nine centers to date. I'm also very pleased to report from April, AlloMap is in networks for all of Anthem's network health plan across the US. 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 US. Now turning to our transplant-led product. Our HLA typing product are used in labs throughout the world to help determine which organs or bone marrow are a transplantation match between the donor and the recipient. Our first quarter product revenue 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 products in 2019.

AlloSeq TX for HLA typing, AlloSeq's DNA kit, and AlloSeq BMT for bone marrow transplant testing. With the addition of OTTR, our patient engagement model is extending. CareDx remains the leading provider of high-value transplant surveillance solutions and has added capabilities to manage patients longitudinally and further impact long-term patient outcome. Today, we care for approximately 4% of the US kidney transplant 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.

Michael Bell -- Chief Financial Officer

Thank you, Peter. Turning first to the income statements, 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 of 2019, our non-GAAP net income was $2.2 million compared to a non-GAAP net loss of $4.0 million in 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 non-controlling 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 equivalence of March 31st, 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 for the full-year 2019. As Peter mentioned, yesterday, we completed the acquisition of OTTR complete transplant management for $16 million.

This transaction has been funded with cash on hand. And we expect OTTR revenue for the full year 2019 to be in the $6 to $8 million range or $4 to $5 million from May through December with net income anticipated to be break-even. Turning to guidance, we are updating our 2019 revenue expectations to reflect the continued growth of our SHORE and anticipate $130 million to $150 million for the year including $4 to $5 million for the OTTR acquisition. With that, I will open the call for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the * key. Our first question comes from the line of Bill Quirk with Piper Jaffray. Please proceed with your question.

Bill Quirk -- Piper Jaffray -- Analyst

Great. Thanks. And good afternoon, everyone. So, first question is should we expect to see data on KidneyCare at the upcoming meeting here? Or when might this be released?

Peter Maag -- Chief Executive Officer

I think we have very strong data packages obviously on AlloSure. The Predigraft data is readily available because Alexandre 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're very excited about also applying a team expression profiling technology to the field of transplantation. This will be initially launched as a combination of the three and launched out probably in what we always do, in formal clinical trial, making that available to transplantation and clinicians on a trial basis.

Bill Quirk -- Piper Jaffray -- Analyst

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

Peter Maag -- Chief Executive Officer

No. I think we have been talking about AlloSure as really the driver for the company in the short term. I think we're building out a strong moat in transplantation. The reimbursement strategy has not been laid 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.

Bill Quirk -- Piper Jaffray -- Analyst

Okay. Great. And then just last one for me. Just thinking a little bit about your strategy from earlier -- actually, I think you brought it up on the fourth quarter call. But wanted to get deeper with your existing accounts versus necessarily adding new accounts just for the sake of adding them. Does the new KidneyCare -- does that change that strategy at all, maybe make it essentially bimodal where you're going basically in both directions deeper as well as broader? Thanks.

Peter Maag -- Chief Executive Officer

Bill, thank you very much. And good question. No. I think you see that we are now in this quarter in 101 centers which is completely confirming our strategy. We also see for KidneyCare the same strategy play out. It's going deep into these transplants. Understand 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.

Bill Quirk -- Piper Jaffray -- Analyst

Okay. Got it. Thanks very much, guys.

Operator

Thank you. Our next question comes from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Brandon Couillard -- Jefferies -- Analyst

Hey. Thanks. Good afternoon. 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 quantify the impact from HeartCare and perhaps the breadth of users in terms of docs or centers that have ordered? And then does that change at all how you're thinking about AlloMap growth for the year, relative to the mid-single-digit assumption that you'd penciled in there for '19?

Peter Maag -- Chief Executive Officer

Brandon, excellent question. I think HeartCare is really changing the paradigm in heart transplantation. And the excitement that we felt in the ISHLT congress was palatable. It was great to see. You actually see the number of centers that have adopted SHORE, our registry study. But it's exceeding our expectation. 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 a catchup 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 mid-single-digit volume growth for AlloMap.

Brandon Couillard -- Jefferies -- Analyst

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

Peter Maag -- Chief Executive Officer

Both excellent questions. I think on the OTTR, there're obviously easy drop-ins for a few centers. But it will take quarters and quarters for us to adopt AlloSure testing or AlloSure functionality or AlloMap functionality with a simple mouse click. In some centers, it will be a great -- the team is actually right now catching up the strategy. And we'll be updating you as we are progressing on having worked through option two OTTRs 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 and make sure that there's a tiers and compliant opportunity to increase that together, with centers, realizing that they're actually skipping a lot of the surveillance opportunities for this patient. And then longer term, there's the artificial intelligence option.

But shifting over to the regulatory and the reimbursement strategy for KidneyCare, I think we'll be launching KidneyCare and track the excitement of the transplant community at the American Transplant Conference. 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, felt the DNA testing as more of an injury market than having AlloMap Kidney as an opportunity to measure immunoactivity. And then on the third leg would be allograft prediction in terms of how long does the allograft actually run to which is very exciting with the iBox. So, this comprehensive concept, multimodality testing is very exciting ground.

Brandon Couillard -- Jefferies -- Analyst

Thanks. That's helpful. And then one more for Mike, just in terms of the outlook for the year. How should we expect operating expenses to trend sequentially from the first quarter with the balance of the year? And do you still expect a positive EBITDA for the full year? And then thirdly, how will OTTR impact the gross margins and operating margins? Thanks.

Michael Bell -- Chief Financial Officer

Yeah, Brandon. On the operating expense, if anything, from a non-GAAP viewpoint in Q1, the operating expense was about $16 million. I would say by the end of the year in Q4, that operating expense would be about $21 million. So, probably going about $5 million. Increase being driven by OTTR expense, about $1 million a quarter and the rollout off SHORE and the continued rollout of K-OAR. And by the end of Q1, we'd filled out our sales and marketing as we'd 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 year. And from a margin perspective, OTTR's gonna be break-even from an EBITDA perspective. So, very small impact on gross margins and very small impact on EBITDA margin overall.

Brandon Couillard -- Jefferies -- Analyst

Very good. Thank you.

Operator

Thank you. Our next question comes from the line of Per Ostlund with Craig-Hallum Capital. Please proceed with your question.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Thanks. Good afternoon, everybody. And congratulations to Jim on his well-deserved retirement. Wanna start out with AlloSeq cfDNA. So, Peter, you guys are featuring this in some presentations at EFI this week. I 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 geographic areas of focus and that sort of thing? And how much does the Allenex infrastructure, from that acquisition, help grease the skids for you to get to market with that product?

Peter Maag -- Chief Executive Officer

Hey. Thanks for your question. And thank you so much for shedding light on the product. So, I'm actually today in Portugal, at the EFI congress. And it's great to be together with our distributor network, to be here with the team and see the excitement that AlloSeq cfDNA is bringing. Obviously, everybody is looking at our success in the United States and what this could bring to the transplantations outside of the US as well as we are adopting cell-free DNA testing. We're actually launching two products. One would be the AlloSeq TX17 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 found in the US.

We'll 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 setting. And then very important around reimbursement. We don't think that this will be revenue-relevant this year. And it'll take maybe into the middle of next year in order to be really revenue relevant. But this is a long product strategy for us. And we're very excited to be launching this product very soon in this market.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Okay. Very good. Coming back to domestic AlloSure and the kidney market, in terms of some of the competitive noise, we'll call it, that's out there, have you -- 2019, I think you've well-telegraphed, is the year of building the competitive moat. 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 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?

Peter Maag -- Chief Executive Officer

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

Per Ostlund -- Craig-Hallum Capital -- Analyst

Okay. The last question for me is a follow-up to Bill's, actually, related to KidneyCare. So, looking forward to that launch here coming up in a few weeks. Peter, did you suggest that that would probably see something, a Kidney version of SHORE, essentially, to get center adoption of the multimodality test?

Peter Maag -- Chief Executive Officer

If you have followed the company, we're really science-based and evidence-based. And if we are bringing out a new concept which is really an exciting concept of combining three 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 information with a multicenter prospective initiative. As K-OAR has been such a great success, there's more than 50 centers recruiting more than 1,000 patients. I think there is 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 who are caring for these patients.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Okay. Excellent. Thank you very much, Peter.

Operator

Thank you. Our next question comes from the line of John Hsu with Raymond James. Please proceed with your question.

John Hsu -- Raymond James -- Analyst

Good afternoon. If I could just start off with the guidance, the increase, it looks like with the $4 to $5 million from OTTR that the raise was somewhere in the $3 to $4 million range 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 driving the increase organically and the revenue guidance.

Peter Maag -- Chief Executive Officer

I'll let Mike talk to it. He's the closest to the number. Mike?

Michael Bell -- Chief Financial Officer

Yeah, John. I think the growth on the guidance -- you're right. Roughly half of that come 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, it's just continued acceptance of AlloSure.

John Hsu -- Raymond James -- Analyst

Got it. And then 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.

Peter Maag -- Chief Executive Officer

We have originally talked about 1,000 patients to be recruited by June this year. And in a good fashion, I think we over-exceeded against this and a quarter early. Now it's end of March that we have exceeded the thousand-patient recruitment target. You were right that it's probably the 1,500 will take some time. I think there will be some centers that are not fully recruiting. So, if we're at 50 centers and maybe there's an additional center, and they are recruiting 30 patients. So, it will be in this range between 1,400 and 1,500 patients.

And it'll go beyond June. And we are, in a way, continuously being interested and very excited about adopting the technology. Now there are some centers that actually do want to be an additional inside -- we have a few centers, really, actually increasing their recruitment from 30 to 50 patients or so. And that's also an option. But we're extremely pleased with how K-OAR has really established the surveillance protocol in kidney transplantations. Fifty transplant centers are now using the seven plus four plus four protocol which, in itself, is a key accomplishment for the company.

John Hsu -- Raymond James -- Analyst

Excellent. And then if we could just stay on enrollment. If we just fast-forward a little bit on KidneyCare, clearly you said that there will be some incremental enrollment. So, again, just thinking about the moat, I know most high-volume centers typically do call it 100 to 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 KidneyCare and the registry study associated with that.

Peter Maag -- Chief Executive Officer

Our strategy always has been that we get transplant centers accustomed with the surveillance protocols through the K-OAR study which is a study that we had discussed with Medicare to make sure that we have our coverage on the data development. And now I think there is a broad-based adoption in many centers that have used AlloSure beyond our surveillance protocol. I think this next study will really be based on how can we accumulate information based on these three data points that we're providing or these three markers that we're 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 essentially 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 -- in some centers, even 300 -- kidney transplant patients per use.

John Hsu -- Raymond James -- Analyst

Okay. Great. That's very helpful. And then last one for me. Just thinking about the surveillance patients added in the quarter, clearly you gave a nice breakout last quarter of -- it's really just 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 back into the map based on the patients added for K-Oar specifically. But can you just help us think about maybe the other three pieces associated with that number? Thank you.

Peter Maag -- Chief Executive Officer

Yeah, John. I think what we saw in this first quarter of 2019 was very similar surveillance patient movements as previous quarters. So, the attrition rate was, again, in that 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 the 60% in the first year. So, that led to an addition of approximately 800 new surveillance patients in the quarter.

John Hsu -- Raymond James -- Analyst

Okay. Great. That's really helpful. And sorry. Just last one for me. Are we seeing any movement on the renal care front in terms of secretaries made some comments and Peter, you had 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?

Peter Maag -- Chief Executive Officer

Yeah. I think this is a very exciting development that there is broad-based support of kidney issues in the current HHS setting. And Asar is really spearheading a great momentum there. There hasn't come up something very specific yet. But we do anticipate that something will come up within the next three to six 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 here that transplantation is actually cost-effective versus dialysis. So, there is a lot of tailwind, so to speak. I don't think that this will be relevant this year. But as we see transplantation gaining here and momentum I think increasing, the donor population will be a long-term positive for us. And these type of issues will be helping the company going forward as transplantation and things -- it's an exciting field.

John Hsu -- Raymond James -- Analyst

Okay. Great. Thank you so much.

Operator

Thank you. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press *1 on your telephone keypad. Our next question comes from the line of Yi Chen with H.C. Wainwright. Please proceed with your question.

Yi Chen -- H.C. Wainwright -- Analyst

Thank you for taking my question. My first question is is the raised revenue guidance simply driven by the acquisition of OTTR which has annual revenue up $6 to $8 million? Or is it also driven by anticipated higher than previous anticipated test volume?

Peter Maag -- Chief Executive Officer

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

Michael Bell -- Chief Financial Officer

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

Yi Chen -- H.C. Wainwright -- Analyst

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

Peter Maag -- Chief Executive Officer

I think we haven't talked about the reimbursement and the regulatory path for the product right now. It is a concept I would think if it's care really is in calculating a concept similar to HeartCare where we're combining AlloMap and AlloSure. Here, we don't expect right now AlloSure for this year, our contributions from Predigraft which is the iBox technology as a product as a contribution for this year.

Yi Chen -- H.C. Wainwright -- Analyst

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

Peter Maag -- Chief Executive Officer

I'll turn to Mike. I do think that we see that there's a very positive -- that rather than battling every reimbursement and going back and having negotiations with everything on AlloMap is that we are now in more than 80% under contract on our [inaudible] network with Anthem. That's a key signal for transplantation issues and high-value diagnostics. And so, we see the signaling, in fact, as a very important effect. Mike, did you wanna add to that?

Michael Bell -- Chief Financial Officer

Yeah. Yi, Anthem for AlloMap represents just under 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 a out-of-network basis. And it takes a longer time to get paid on the out-of-network basis. So, being in-network, it'll 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.

Yi Chen -- H.C. Wainwright -- Analyst

Got it. And a final question. Is there an update regarding the litigations against Natera?

Peter Maag -- Chief Executive Officer

Nothing specific. 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.

Yi Chen -- H.C. Wainwright -- Analyst

Got it. Thank you.

Operator

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

Peter Maag -- Chief Executive Officer

Got it. Thank you.

Operator

I'd like to turn the floor back --

Peter Maag -- Chief Executive Officer

Thank you very much.

Operator

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

Duration: 44 minutes

Call participants:

David Clair -- Investor Relations

Peter Maag -- Chief Executive Officer

Michael Bell -- Chief Financial Officer

Bill Quirk -- Piper Jaffray -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Per Ostlund -- Craig-Hallum Capital -- Analyst

John Hsu -- Raymond James -- Analyst

Yi Chen -- H.C. Wainwright -- Analyst

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