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CareDx Inc (NASDAQ:CDNA)
Q3 2019 Earnings Call
Oct 31, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to CareDx Inc. Third Quarter Financial Results Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions]

I will now turn the conference over to your host, Greg Chodaczek with Gilmartin Group. Go ahead please.

Greg Chodaczek -- Investor Relations

Thank you. Good afternoon, and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended September 30, 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 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 facts should be deemed to be forward-looking statements. All forward-looking statements include, 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 in the Securities Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, October 31, 2019. CareDx disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections or other forward-looking statements, whether because of new information, future events or otherwise.

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, Greg, and good afternoon, everyone. We had another record quarter at CareDx, delivering strong growth across our portfolio and expanding our leadership position in transplantation precision medicine. During the quarter, we continued to increase our mode in transplantation with a further expansion of our surveillance testing services, the global launch of AlloSeq cell-free DNA, the acquisition of XynManagement and the addition of two new Board members.

For the third quarter of 2019, total revenues were $33.8 million, increasing 60% compared to the year ago quarter. Growth in the quarter was primarily due to testing services revenues increasing 68% with digital revenue from our recent OTTR and XynManagement acquisitions contributing $1.4 million to the top line. In Testing Services, CareDx provided 8,524 AlloSure kidney results to approximately 6,600 transplant patients in the third quarter. Since launching AlloSure kidney in October 2017, we have provided results to almost 14,000 patients, which equates to approximately 7% of the total number of living kidney transplant patients in the US.

During the quarter, we continue to expand our kidney transplant surveillance services by announcing the enrollment of the first patient in the OKRA study, a multi-center prospective observational clinical trial. This landmark registry study is designed to measure outcomes of transplant recipients using KidneyCare, our next-generation solution for kidney transplant patient surveillance. The combination of AlloSure's donor-derived cell-free DNA test, AlloMap's gene expression profiling and iBox's graft survival Artificial Intelligence algorithm will provide physicians with the most comprehensive option to manage kidney allograft health [Phonetic].

Turning to numbers on AlloSure Kidney. During the third quarter, 124 centers provided AlloSure results to their kidney transplant patients. We estimate that these 124 centers account for approximately 65% of the transplant volume in the United States. We finished the third quarter of 2019 with approximately 5,700 surveillance patients. We define surveillance patients as patients that are managed by CareDx on a predefined transplant center testing protocol. These 5,700 surveillance patients help build the recurring revenue effect of AlloSure kidney. The surveillance attrition rate in Q3 was consistent with previous quarters. As indicated on the last quarter call, we consider these dynamics as being in line with industry standards.

Overall, reimbursement in the third quarter was also consistent with previous quarters with 70% to 80% of our AlloSure kidney volume attributed to Medicare patients. Medicare reimbursement for AlloSure kidney was granted two years ago through the MolDx program at Palmetto. At that time, MolDx requested that we develop additional clinical data through the K-OAR study, with the understanding that the readout of the end of the study would determine the level of clinical utility of AlloSure and potentially lead to a review of reimbursement levels. This was known as coverage and the data development.

However, in August 2019, when MolDx issued the draft local coverage determination for AlloSure Heart, they also took the opportunity to remove the data development requirement for AlloSure kidney, which in fact confirms our belief that the currently available clinical data for AlloSure is sufficient for ongoing Medicare reimbursement coverage. This increases reimbursement certainty as the final local coverage determination will remove the need for reassessment at the end of the K-OAR study.

Although, multi-center studies like K-OAR and OKRA will no longer be required by Medicare when the draft LCD is finalized, they continue to be critical for us as they generate incredibly important clinical data, as well as providing additional touchpoints with the key innovation hubs and opinion leaders. These studies also help drive compliance and adherence to standard protocols, which is a crucial element to our work in the transplant community. We continue to make progress enrolling centers and patients in K-OAR. As of the end of September 2019, 53 centers had been initiated as K-OAR study sites and 1,390 patients had been enrolled. We expect to complete K-OAR enrollment in early 2020 -- we expect to complete K-OAR enrollment in early 2020.

Now, shifting to heart. Third quarter 2019, AlloMap heart testing volume increased 16% year-over-year, translating into 4,726 patient results. Heart care, the combination of AlloMap and AlloSure Heart continues to see increased adoption in the transplant community. Our Surveillance HeartCare Outcomes Registry or SHORE study is gaining traction with transplant cardiologists and we have recruited already 31 centers into SHORE to-date. As I mentioned earlier, AlloSure Heart received a positive draft local coverage determination from MolDx this quarter.

Approximately, 35% of heart transplant patients are covered by Medicare and the MolDx draft coverage underscores the value we bring to the transplant patient care. Towards the end of the quarter, we announced a strategic partnership with NanoString to develop HistoMap, a gene expression profiling solutions to identify allograft rejection in transplant biopsy tissue. This partnership with NanoString will further enhance the development of precision medicine tools in transplantation and help to improve transplant diagnostics.

Now moving to our product business. This quarter, we expanded our market leading portfolio of transplantation product with the global launch of AlloSeq cell-free DNA at the ESOT Conference in Copenhagen. We estimate this launch will enable access to our cell-free DNA surveillance technology to an additional 800,000 patients outside the United States. We also introduced AlloSeq Tx 17 at the ASHI/BANFF Conference in Pittsburgh. AlloSeq Tx 17 is the first of its kind next-generation sequencing HLA typing solution, utilizing hybrid capture technology. This best-in-class technology enables the most comprehensive sequencing available, covering more of the HLA genes than current solutions and adding coverage of non-HLA genes that may impact transplant patient matching and patient management.

The initial feedback to AlloSeq cell-free DNA and AlloSeq Tx 17 was very encouraging. Our HLA typing products 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 third quarter product revenue contributed $4.2 million to top-line and year-to-date product revenue growth is 19%, driven by continued traction of TruSight HLA and QTYPE.

Now focusing on our digital business. Our digital revenue was $1.4 million this quarter. This is the second quarter that we have reported digital revenue following our recent acquisitions. In May, we acquired order and most recently in August, we strengthened our growing portfolio of transplant software solutions with the acquisition of XynManagement, the leading provider of solutions to simplify transplant quality tracking and waitlist management. XynManagement provides two unique solution, XynQAPI and Waitlist Management. XynQAPI is currently used in 28 centers and simplifies transplant quality tracking and reporting. While Waitlist Management, includes a team of care managers who maintain regular contact with approximately 6,000 patients on the waitlist to help them prepare for their transplant and maintain eligibility.

Going forward, the CareDx team will strive to bring our multi-modality testing solutions and machine learning algorithms to the transplant clinic under our iTrack umbrella. A highlight in our digital business this quarter was the publication of a clinical validation study of KidneyCare's iBox technology, in the British Medical Journal or BMJ. The BMJ study assess the performance of the iBox risk prediction score in 7,500 kidney patient recipients. With a median follow-up time of seven years across 10 academic medical centers in the United States and Europe.

The iBox risk prediction score combined allograft function, histological and immunological parameters with HLA donor specific antibody profile to accurately predict the risk of long-term kidney allograft failure, as well as to identify significant changes at the end of -- at the time of therapeutic intervention. The iBox risk prediction score may help guide patient monitoring and further improve the design time and development of a valid and early surrogate endpoint for clinical trial.

Last but not least, we were pleased to welcome two new members to CareDx Board of Directors during the quarter, Grace Colon and Chris Cournoyer. Dr. Colon joined the Board in July, since 2013, she has served as President, Chief Executive Officer and Director of InCarda Therapeutics, a clinical stage company developing therapeutics for cardiovascular conditions. In addition to her role at InCarda, she is Executive Chairperson of ProterixBio and as a member of the Board of Cocoon Biotech. Chris Cournoyer joined the Board in August and was previously the Chairperson, and Chief Executive Officer of N-of-One, which is a leader in cancer precision medicine. Chris brings deep experience in technology and to our multiple experiences with digital health solutions will be invaluable to CareDx as we build out our digital offerings.

In summary, our 20-year commitment to transplantation has given CareDx and unparallel understanding of workflows at transplant centers and the unique needs of these patients. The CareDx team is committed to constantly expanding technological boundaries to improve our services and products and make a difference in the lives of transplantation. Before I hand over to Mike to discuss the financials, I would like to remind everyone that we will be hosting our Annual Investor Launch [Phonetic] meeting at our South San Francisco office on the last day of the JPMorgan Conference on Thursday, January '16. Many make the CareDx office the last stop on the way to the airport. Invitations will be sent out in the near future by Greg from the Gilmartin Group, our new IR firm. Please let us know if you're able to attend.

Now Mike over to you.

Michael Bell -- Chief Financial Officer

Thank you, Peter. Turning first to the income statement. Our third quarter 2019 testing services revenue increased 68% year-over-year to $28.2 million. The significant growth in testing services revenue was primarily driven by the 8,524 AlloSure patient results we provided in the third quarter. Growth also came from the 4,726 AlloMap patient results we provided, which was a 16% increase compared to the prior year quarter.

Our third quarter product revenue was $4.2 million and year-to-date product revenue growth of 19% continues to track to our expectations. Digital and other revenue for the quarter was $1.4 million, and increase revenue from our acquisition of OTTR as well as from the XynManagement acquisition, which closed in late August. Total revenue in the third quarter of 2019 was $33.8 million, representing a 60% increase compared to the prior year $21.2 million.

Our gross margins continued to improve year-over-year. For the third quarter of 2019, the overall gross margin was 66% compared to a gross margin of 58% in the same period of 2018. The non-GAAP gross margin for the quarter was 69% compared to 61% in the prior year quarter. It's worth highlighting that the non-GAAP gross margin for the testing services business for the three months ended September 30, 2019 has improved to 75% compared to 67% in the same period of 2018.

For the third quarter of 2019, the net loss was $1.8 million compared to a net loss of $20.0 million in the same period of 2018. Our net loss per share was $0.04 for the quarter compared to a loss of $0.54 per share in the third quarter of 2018. Our third quarter 2019 net loss included a $6.0 million stock-based compensation expense and a $4.3 million gain from the change in estimated fair value of common stock warrant liabilities. For the third quarter 2019, our non-GAAP net income was $0.9 million compared to a non-GAAP net loss of $0.6 million in the same period of 2018. Our non-GAAP net income per share was $0.02 for the quarter compared to a non-GAAP net loss per share of $0.01 in the third quarter of 2018.

As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization and other expenses. For the third quarter of 2019, adjusted EBITDA was a gain of $0.8 million compared to a gain of $0.2 million in the third quarter of 2018. This marks our fifth consecutive quarter of positive adjusted EBITDA. As we indicated on the last earnings call, we increased our operating expenditures in the third quarter of 2019 to further enhance our leadership position in transplantation.

Operating expenses in the quarter reflect our fully expanded testing services field-based team, our significant presence at major trade conferences such as ASHI and ESOT, our continued investment in clinical studies such as K-OAR, SHORE and OKRA, as well as our burgeoning focus on digital. We expect our operating expenses will modestly increase in future quarters, as we continue to build a platform for future growth. Cash and cash equivalents at September 30, 2019 was $40.9 million compared to $43.5 million at the start of the quarter. Net operating cash flow was positive $0.6 million in the third quarter 2019, with the movement in cash in the quarter primarily reflecting our investments in XynManagement and Cibiltech.

Turning to guidance. We are increasing the lower end of our 2019 revenue expectations to reflect our performance in the third quarter and now anticipate $124 million to $125 million for the year.

With that, I will open the call for questions.

Questions and Answers:

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Thank you. Your first question comes from Bill Quirk, Piper Jaffray. Go ahead please.

Bill Quirk -- Piper Jaffray -- Analyst

Great. Thank you. Good afternoon and once again a very nice quarter, gentlemen.

Peter Maag -- Chief Executive Officer

Thank you very much, Bill.

Bill Quirk -- Piper Jaffray -- Analyst

So first question I had Peter was the comment about attrition, and obviously good to see that, that is consistent from quarter-to-quarter. I have a question for you though, given that we have a number of patients that are currently undergoing AlloSure testing but yet are not in year one, where the protocol suggests that they may get four or fewer tests. And you've had some previous comments to suggest that the care patients are going to have about 75% adherence and maybe about 50% or so adherence for surveillance patients. Is another term for attrition simply, the testing interval by chance? In other words, if you had a patient you get tested in the first quarter, they may not necessarily be even up for a second test in the second quarter, for example.

Peter Maag -- Chief Executive Officer

Yeah. I think this attrition discussion has been lingering around. We see the dynamic as completely standard and industry straightforward. So, Mike much be able to shed more light on that.

Michael Bell -- Chief Financial Officer

Yeah. The way we define attrition is basically we have standing order patient where we have orders for a number of tests over a 12-month period. We define attrition where [Phonetic] that standing order has ended in the quarter and hasn't yet been renewed by the end of the quarter. So those standing order patients could come back because that order could get renewed. It's just not been renewed by the end of the quarter. So it's not quite the interval in testing exactly as you're describing it but that could be a -- that could be an influencing factor.

Bill Quirk -- Piper Jaffray -- Analyst

Okay. Very good. Thank you. And then two additional ones from me. First is on AlloSeq, or AlloSure rather outside of the US. Can you help us think about, I guess, the early stages of the launch? If you can recall, this is very much a country by country focused, realizing that you don't want to give 2020 guidance, but maybe help us think a little bit about what we should be expecting in the first year there?

And then secondly, just thinking about AlloMap, it continues to be a nice outperformer here several quarters and in a heart care launch. How important would you say that the addition of AlloSure is to compensate physicians [Phonetic] either to stick with the product for a longer period of time or for that matter, bringing on some new physicians who had previously not been interested in using the single product, but rather interested in using the combined product? Thanks guys.

Peter Maag -- Chief Executive Officer

Well, thank you very much. And today you heard us the first time to talk about 800,000 patients as additional potential users of an AlloSeq opportunity outside of the United States. So this cell-free DNA technology has received tremendous, tremendous interest from transplant centers all over the world. Now our beta sites where we are currently conducting our first initial user testings is, I'm very excited about getting cell-free DNA in their hands. I think you mentioned that probably reimbursement in molecular diagnostics in ex-US market is really the key to success. I think we navigated this extremely well in the United States with our AlloSure, but that will be also the key to success in the ex-US market.

Now we haven't guided on the product revenue for next year and probably by March next year, we'll be in a position to give you a better answer. But really reimbursement is going to be key. I think in broad strokes, it will be revenue relevant next year, but really the 2022 and -- 2021 and '22 will then be -- we will see the full kicking-off that product business. So we always said it's not relevant in 2019, maybe it becomes a bit relevant -- revenue relevant in 2020, but then really they are kick-in of additional revenues will come in the 2021 phase.

And then on the heart care, we are very excited about heart care as the community has increased this combination of AlloMap and AlloSure and you see 16% growth on the AlloMap franchise, that's very, very strong growth from our perspective. The number of centers now increasing heart care. Quite frankly I think it's very surprising to me that we've been so successful with everything that's ongoing in the company to actually engage so many transplant centers in the US to start on the short trial and that really speaks volumes to the power of the combination of AlloMap and AlloSure.

We're probably attributing roughly half of the growth of the -- of the heart care franchise with the SHORE trial excitement or the other way to say is that half of the AlloMap growth is probably associated with the heart care concept. So I think there is a strong growth driver for us in 2019 on the heart franchise.

Bill Quirk -- Piper Jaffray -- Analyst

Got it. Thank you very much guys.

Operator

Thank you. Your next question comes from Brandon Couillard, Jefferies. Go ahead please.

Matthew Mishan -- Jefferies -- Analyst

Hi, guys. This is Matt on for Brandon today. Thanks for taking my questions. First one, if we look at the implied 4Q guidance, it suggest around $33 million to $34 million of revenue, which would essentially be flat sequentially, given the underlying momentum you're seeing on the kidney front and the strength on the heart side of the business. Can you walk through some of the puts and takes there informing your implied 4Q guidance? Thanks.

Peter Maag -- Chief Executive Officer

Yeah. I know -- and thank you so much. And we as previously in previous year have always talked about the fourth quarter, being probably a less surveillance quarter for transplantation. So we just see less transplantation surveillance visits. Patients do not want to come in into the transplant center during the holidays, or even during Thanksgiving. So fourth quarter has always been a little bit of a seasonal effect for us. Overall, I think we are going into the fourth quarter with 5,738 surveillance patients, which is a very strong momentum build for us into the quarter. And we see -- we saw in the third quarter, a volume growth on the kidney side, but also want to make sure that you realize that the fourth quarter is always a bit of a fourth quarter dimension.

Michael Bell -- Chief Financial Officer

Thanks. Maybe I'll just add on the guidance. We had a strong third quarter. I think that's -- that's enabled us to raise the lower end of the guidance from $1.23 million to $124 million. So we're now at $1.24 million to $1.25 million. So I think we say feeling confident with that guidance and still expecting, yes, some sequential growth coming from AlloSure.

Matthew Mishan -- Jefferies -- Analyst

Thanks. And then if we look at the net surveillance patient adds in the quarter, another nice quarter there, especially excluding those outside of the K-OAR study. Can you just talk a little bit about what is underpinning the momentum you're seeing there, in terms of the kind of acceleration there in the net adds?

Peter Maag -- Chief Executive Officer

No. If you look at our numbers though, I think pretty strong numbers when you see our total patient results, you look at also the dynamic of ordering centers have moved up from 117 to 124 in the quarter. And now these additional 1,000 patients on the surveillance at, I think that's all pointing in the right direction. I would say that these new centers they are embracing the arts schedule, which is the 7 plus, 4 plus, 4 schedule. And I think that is now established through more than 50 centers through the K-OAR study have embraced this arts schedule and the protocol. And if you ask as a new center coming on stream, how should I use this product. It's very obvious how to use Allosure it's seven plus four plus four. And so I think this is a really very successful in the context of 5,000 -- more than 5,700 patients now on a surveillance schedule. So I think we are very pleased with that.

Matthew Mishan -- Jefferies -- Analyst

Super. Thank you.

Operator

Thank you. Your next question comes from John Hsu, Raymond James. Go ahead please.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Great. Thank you. Peter, if we -- Peter or Mike, actually if you could start going back on the guidance. I appreciate that there is typically some seasonality and seasonal decline in testing in the 4Q. But just to be clear, are you expecting any specific impact from competition or competitors enrolling in and competing research studies in the 4Q?

Peter Maag -- Chief Executive Officer

John, that's an excellent question and I think we actually hadn't anticipated a fourth quarter impact of competition. I'm sitting here right now at -- we are in November and haven't had a news on reimbursement of any other significant test other than the true craft [Phonetic] offering. I think that speaks to us probably not having a lot of expectations on the fourth quarter in terms of impact on competitive testing.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Okay. Great. Regarding the center penetration you picked up again here in the 3Q. You've been making tremendous progress there on the kidney side, maybe you could talk, Peter, a little bit about the progress and maybe where you are in terms of the centers that are going deep, where you have a written protocol? I would argue, you probably the [Indecipherable] there? And then the second part of the question is, the penetration of the remaining high volume centers clearly, you've talked about 100 centers having 80% of the volume. So I guess the hold-outs at this point. What's the data that they need to be convinced is it, is the one-year primary outcome data and if so when can we expect that?

Peter Maag -- Chief Executive Officer

No. Two excellent questions. The first one is, yeah, I mean 124 centers in the United States, that's almost half of our transplant centers in the US are now exposed to an Allosure. And that's very exciting, but the really important component that you horned in is -- are they using -- have they embraced beyond K-OAR and a protocol, and is there an AlloSure protocol established in these centers. And we started the year with about ten centers having a protocol and now we have passed more than 20 centers have embraced in Allosure protocol as a standard for their center, which is very strong for us, and which is probably driving some of the surveillance patients increases that we see here. So, we will be very pleased with going deep and you'll see the numbers speak for themselves here where we are being quite successful in penetrating there.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Great. And sorry, just on the remaining high volume centers, some of the hold-outs. If we had to think about maybe the 15% gap if you will, of the remaining high volume centers based on the way you've kind of dissected the market, is there any, I guess, one thing that they're waiting for in terms of data that could maybe drive some greater adoption and I guess the remaining holdouts?

Peter Maag -- Chief Executive Officer

I think the one data that we are probably pretty excited about to generate relatively soon, now we have such big patient data pool. And being clear, we call this about being comfortable with living in the gray because it's relatively clear, if you have a very low Allosure score. What it means, there is no active rejection. But if you have a very high Allosure score, it's also clear -- it's pretty clear that there is a rejection. I think what the data that we need and that experience will bring. What do you do with those patients that are in this 0.5% to 0.9% range and generating more experience and more data is this really TCMR 1A rejection or is it actually a misread of a biopsy for example. I think that type of data will be very convincing to many opinion leaders and we are in the midst of generating very exciting data on that and releasing that probably somewhere between AS and ASTS and ATC next year.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Okay. Great. Thank you for that. And then the last one from me. We've got an update here recently, as far as there is some movement relating to the KidneyCare executive order specifically, regarding the organ procurement organizations and living donor rules, there are some movement toward getting those finalized, also Fresenius recently announced the universal living donor registry. So I guess the question is, clearly, the rate of kidney transplants have been growing pretty nicely here over time, I think something around on the order of 5% per year over the last 30 years. But I guess, looking into next year, Peter do you have a sense of any of these catalysts as potentially accelerating the pace above the normal rate for adoption in transplant?

Peter Maag -- Chief Executive Officer

No. And thank you so much for that question, because I think that's one of looked [Phonetic] in 2000 -- in September, CMS removed the outcome requirement for transplant centers pre-approval. And I think that has a very, very strong impact for the transplant community because this one year graft survival number has been now removed. That does really do two things. One, it will increase the need -- the ability for transplant centers to also transplant marginal organs. And then secondly, it will also increase the need for transplant centers having better quality systems, because they are now measured on long-term outcomes qualities versus just this one year graft survival. So that's plays exactly to what we are playing toward the kidney care initiative, which is very exciting for us. So you will see an increase in kidney transplants next year based on this initiative. And secondly, you will see an increase of need of transplant centers to have increased quality measures, which we with our thin coping [Phonetic] offering will be able to address.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Excellent. And maybe if I could sneak in one more, just because you mentioned the need for better quality systems. You obviously did the OTTR and then Xyn acquisitions, you have iBox on board now and starting to collect data. Can you just give us an update, broadly speaking on your software strategy and how you see that trending?

Peter Maag -- Chief Executive Officer

And I think it's relatively short term, the software strategy is explained relatively simple. We want to drive adherence and compliance to our AlloSure Heart schedule. I think longer term, we want to be really sticky with transplant centers and offering them unique solutions that are along the patient journey pre-transplants for the waitlist management, HLA typing, and then the post-transplant surveillance options. In order to aggregate all that information in that data, you need to have a backbone, which we have with OTTR and XynManagement now in place. But really only on at the very early beginning. You see for this quarter of recording $1.4 million in revenue that's only an early start, but what we're really building is a huge capability within the organization of being able to provide and interact with transplant centers on the long term. But on the short term, it's really the 75% adherence to the K-OAR protocol or 65% adherence that we see outside of K-OAR, how can we increase AlloSure adoption by better software tools compliance and adherence management with our patient care managers both pre-transplant and then post-transplant.

John Hsu -- Raymond James & Associates, Inc. -- Analyst

That's very helpful. Thank you so much.

Operator

Thank you. Your next question comes from Alex Nowak, Craig-Hallum Capital Group. Go ahead please.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Hi. Good afternoon, everyone. This is Alex Nowak here. Just actually a follow-up to that last question there. Just with the OTTR and the other digital solutions that you've acquired now, I mean as a hospital becomes OTTR enabled and again this might be too early to see this just yet. Do you see that AlloSure and the AlloMap the demand or the compliance change once the hospital goes from not OTTR enabled to OTTR enabled?

Peter Maag -- Chief Executive Officer

Alex, this is super early and we are not even a full quarter into some of these acquisitions and combinations. I think what I can tell you is that I almost daily now get exciting pictures of CareDx's employees that are visiting jointly different pockets of transplant centers and have additional insights because being part of that workflow in a transplant centers is so important and understanding how these transplant centers interact and who is making which decision is very critical for us in our business model.

But no, I think, it is very early, I think we do have the first centers that, where we have the -- we call it the AlloSure OTTR button as part of the electronic medical record, which we always thought would be important. But I'll be report in the future about the success of what that incremental lead us to our revenue line. But I'm very excited about the tremendous capability, and quite frankly, also wonderful people that have joined the CareDx village. So at this stage, it's very exciting what we're building [Speech Overlap].

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay. Understood. And -- no. Understood. That makes sense. And then we saw the potential decision here by CMS to once again change that date of service policy for molecular test and kind of going back to the old status quo from a couple of years ago. I know this old policy was a hindrance just to AlloMap, but if the policy is reverted here back to the 2015, 2016 original policy, would there be any impact to AlloSure testing?

Peter Maag -- Chief Executive Officer

I think that's excellent. I think, we have seen a little bit of an impact of AlloMap. But I think we've been extremely capable of navigating that rule with our AlloMap franchise. So I don't anticipate that that would have significant impact, but it is always something that will be working on. Just given the value that we're bringing into these transplant patients at this stage, I can see how we would be submitted under these tremendous changes. These transplant centers are caring for patients on the basis, and so I think that's important that we remain within that framework.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

No. Understood, Completely agree. And then just, Michael, just a quick question, kind of going back to the previous one, you've been able to show some very nice sequential growth over the past seven quarters. Just looking out to 2020, do you think the business can still show a sequential growth in all the quarters next year? Do you think seasonality and more of these one-time things will come more into play next year?

Michael Bell -- Chief Financial Officer

Alex, yeah, I mean, I think, since AlloSure was launched two years ago, we've had sequential growth and we continue to see traction and we are continuing adding surveillance patients. So I think our expectation is that could -- should continue throughout 2020.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay. Understood. Congrats on the great results.

Michael Bell -- Chief Financial Officer

Thank you.

Operator

Thank you. Your next question comes from Yi Chen, HC Wainwright & Co. Go ahead, please.

Yi Chen -- HC Wainwright & Co -- Analyst

Hi. Thanks for taking the question. My first question is, could you clarify those -- for those transplant centers, who have already adopted the AlloSure test. Can they participate in other competing tests PS study or they can only participate in study by using Allosure?

Peter Maag -- Chief Executive Officer

No. These are very large academic medical centers and many of them have multiple researchers on staff and multiple clinicians that are doing research and development. And no, I don't think there is any exclusivity to any of our tests. I think it's actually in a way we are embracing that diversity and the ability to compete with these test also on a clinical level. We actually pride ourselves in a way of bringing these novel biomarkers to the market and have a first mover advantage. It has opened a bit of an avenue for many of these other tests to now embracing these very large registry studies. I don't think that anybody five years ago would have talked about a 3,000, 4,000 patient registry study in post-transplant of -- CareDx is really a first mover on this and we continue to move the -- along in this field with the OKRA study, which will be a new landmark study in post-transplant surveillance in kidney patients. SHORE is a landmark study for the heart transplantation. So I think we're really moving the needle here.

Yi Chen -- HC Wainwright & Co -- Analyst

Thanks. My second question is, when you said that you expect the Allosure test revenue to have sequential growth in 2020. Is there a factor that growth is also driven by the Allosure heart test or it's only going to be a -- primarily be driven by the Allosure for kidney test?

Michael Bell -- Chief Financial Officer

Yeah. When I mentioned that I was talking specifically on AlloSure kidney. So, probably, I should have just been very clear that, yeah, Allosure kidney, we're expecting continued sequential growth. And when we talk about AlloSure heart, yeah, separate test, and of course, that's not reimbursed at the moment.

Yi Chen -- HC Wainwright & Co -- Analyst

And do you expect AlloSure heart to be reimbursed and provide meaningful contribution to the top-line in 2020?

Peter Maag -- Chief Executive Officer

Well, I think in 2020, we will be guiding toward the 2020 number, but I think the way that we have been interpreting the draft local coverage decision for AlloSure heart. I think there is a clinician chooses to use AlloMap and AlloSure heart combined one could interpret the way that this is now written that there probably will be an increase of in reimbursement. I've been on the records that I think we do want to make sure that we are being responsible in the context. But price -- first, we need to get through the final local coverage decision. And then there will be a pricing discussion on the product that we foresee to come maybe mid next year to have been in AlloSure heart reimbursement and we'll update the market as soon as we get these news.

Yi Chen -- HC Wainwright & Co -- Analyst

Thank you.

Operator

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call back over to Peter for closing remarks.

Peter Maag -- Chief Executive Officer

Well, thank you so much for joining the call today. I'm very much looking forward to talk to you soon. Thank you.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Greg Chodaczek -- Investor Relations

Peter Maag -- Chief Executive Officer

Michael Bell -- Chief Financial Officer

Bill Quirk -- Piper Jaffray -- Analyst

Matthew Mishan -- Jefferies -- Analyst

John Hsu -- Raymond James & Associates, Inc. -- Analyst

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Yi Chen -- HC Wainwright & Co -- Analyst

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