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CareDx Inc (NASDAQ:CDNA)
Q3 2020 Earnings Call
Oct 29, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the CareDX Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Greg Chodaczek, Managing Director. Please go ahead sir.

Greg Chodaczek -- Managing Director

Thank you. Good afternoon and thank you for joining us today. Earlier today CareDx released financial results for the quarter ending September 30, 2020. The release is currently available on the company's website at www.caredx.com. Peter Maag, Chief Executive Officer; Reg Seeto, President and Chief Business 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 including without limitation, our examination of historical operating trends, expectations regarding coverage decisions, pricing and enrollment matters and other -- 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. The information provided in this conference call speaks only to the live broadcast today October 29, 2020. 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 certain financial measures that are 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 -- Chairman And Chief Executive Officer

Thanks, Greg, and good afternoon everyone. I'm excited to talk to you today about our outstanding third quarter results and the great work our company is doing to improve the lives of transplant patients and caregivers. Before I get to our quarterly results, I would like to thank every member of the CareDx team once again. We have asked a lot from our team during these trying times and they continue to bring their A-game. Their tireless work and dedication to transplant patients is driving our company to record financial results. In the third quarter of 2020, we reported revenue of $53.4 million, an increase of 58% compared with the third quarter of 2019. Once again, our year-over-year growth primarily came from our testing services with revenue of $45.5 million. Product revenue for the quarter was $5.4 million and digital, and other revenue added $2.5 million to the top line. We have shown that because of our strategy to lean in and to expand our team CareDx has never been stronger and it is a pleasure to have seen Reg grow into the CEO position in this long-planned transition, which we announced earlier today. You have seen us executing a successful business strategy to become a leader in precision medicine combining patient impact, incredible growth, and building a valuable, profitable company. The same has been true for our people strategy. Reg, joined the organization in 2018 and has worked closely with me, the Board of Directors, and the management team to set the company's strategic direction Reg has also led the commercial, clinical manufacturing, and research and development organizations over the past two years, which has significantly and positively impacted the company's performance. Reg has also been instrumental in CareDx's evolution and has successfully executed multiple major initiative, most notably the acceleration of the penetration of AlloSure. In my new active role of Executive Chairman I'm looking forward to working together with Reg in the years to come to continue to build CareDx into an incredible powerhouse in transplant care and beyond as we accelerate the growth from our existing platform. Over to you Reg.

Reginald Seeto -- President & Chief Business Officer

Good afternoon, everyone. Firstly, I want to thank Peter for his dedication and leadership in building CareDx from its IPO to where it is today. It truly is a special place these help shape and build. Secondly, I am deeply honored that the Board has placed their faith and trust in me to lead CareDx to bring this next chapter of growth and evolution. And thirdly, I am extremely fortunate with Pete is staying on as Executive Chair. So we hope to continue this journey together in a seamless fashion. As many of you know, he has been a mentor of mine for more than 20 years. With that said, this is such an exciting growth phase at CareDx. We've been very successful in our response to COVID-19. We provided over 21,800 AlloSure kidney and AlloMap AlloMap Heart Patient results in the third quarter, an increase of 65% year-over-year.

With the number of COVID cases began to accelerate here in the U.S. we made a strategic decision to go on the offensive and invest in areas that will drive growth and create near and long-term shareholder value. As we mentioned during our second quarter call, we look to allocate our capital wisely to position our company for robust growth, and some of these investments already bearing fruit. The first of these investment area is our direct patient capability. Over the past several months, we have built out our community nephrology outreach team. As a reminder community nephrologists provide care to transplant patients once they're safely discharged from the transplant center supervision. Through our newly formed group, we will encourage patients and their caregivers to continue to utilize AlloSure to manage the health of their transplant. Also as part of our outreach program, we recently launched our AlloCare mobile app. It's patient centric resource was designed to help transplant patients better manage their medication, adherence, coordinate AlloSure scheduling with patient care managers, and measure health metrics. We believe this comprehensive app will bring simplicity to the complex care regimen of maintaining long-term health post-transplant. Another area of investment and continues in our mobile phlebotomy offering is what we call RemoTraC. RemoTraC offers transplant patients the ability to have their blood drawn without the need to leave their homes. To date, approximately 150 transplants centers are offering RemoTraC to their patients and over 5,000 kidney, heart, and lung transplant patients have enrolled. For the third quarter, test originating from mobile phlebotomy made up between 30% to 40% of our test results. As expected this rate was lower than the 40% plus level we experienced in the second quarter as clinician and patients are more aware of how to reduce the risk of acquiring or transmitting Coronavirus.

That being said, we believe RemoTraC is a valuable service offering to the transplant patients and caregivers. The third area of our strategic investment is the continuous development and communication of new clinical data and the support of peer-reviewed publications. Earlier this month, we announced the publication of positive clinical data for AlloSure Lung from the multicenter Lung study. The study demonstrated that AlloSure Lung could identify patients with acute cellular rejection a critical need for lung transplant patients is only other option to detect rejection is invasive bronchoscopy. With lung transplant patients having the lowest survival rate of any solid organ transplant we believe having a non-invasive surveillance to like AlloSure can be game-changer for improving the lives of lung transplant patient. With mid-dossier to MolDx all this summer, which we recently updated with the newly published Lung data. Regarding the communication of clinical data in a virtual world, we think it's essential to develop innovative approaches to provide continuing education opportunities to the transplant community. We are achieving this by attending virtual industry conferences using new tools to communicate with clinicians and patients hosting virtual call event. In early September at the virtual International Congress of the Transplantation Society, we hosted four industry symposia, showcased six posters, and sponsored the plenary session. Not to referring our laurels, we continued our industry presence by conducting a token AlloSeq Tx 17 and presenting nine poster on CareDx offerings at the American Society for Histocompatibility and Immunogenetics Conference. Last but certainly not least so 10 publications pinned down about CareDx solutions in the third quarter, including two of the subjects are recently announced pivotal AlloSure lung data. Regarding our ongoing clinical studies we saw an acceleration in our OKRA study enrollment during the third quarter compared to the second quarter. Barring a subsequent increase in hospitalizations due to COVID-19 in fourth quarter, we expect OKRA to remain at the pace we experienced in this past quarter. For our SHORE study the utilization of HeartCare continue the rate we saw in the second quarter as many transplant patients switched their biopsy protocols to AlloSure.

While we reported 28% year-over-year growth on our products business for the third quarter. This business is still negatively impacted by the COVID pandemic because hospitals and transplant laboratories across the U.S. and Europe continue to restrict access to their facilities to some non-essential personnel. It has been difficult for us to gain much traction for our best-in-class product solution. Finally, we're very excited this month we received final Medicare coverage for AlloSure Heart after rigorous technical assessment by MolDx program to determine our non-invasive AlloSure Heart surveillance testing protocol is a valuable solution to managing transplant patient care. This decision also paves the way for heart care. The combination of AlloSure Heart and AlloMap Heart to be made available to providers and patient. We expect to hear reimbursement use from MolDx before the local coverage becomes effective in mid-November.

Now, I'll hand over to Mike discuss our financials. Mike?

Michael Bell -- Chief Financial Officer

Thank you, Reg. Turning first to the income statement. Total revenue for the third quarter was $53.4 million a year-over-year growth of 58%. Our top-line growth was driven by AlloSure Kidney and AlloMap Heart. We saw accelerated penetration this quarter. As a result, testing services revenue in the third quarter increased 61% year-over-year to $45.5 million. Our third-quarter product revenue increased to $5.4 million and our digital and other revenue was $2.5 million. Moving to our gross margins. For the third quarter of 2020, the gross margin was 68% compared to a gross margin of 66% in the same period of 2019. The non-GAAP gross margin for the quarter was 71% compared to 69% in the third quarter of 2019. On a sequential basis, the non-GAAP gross margin recovered by approximately 300 basis points compared to the second quarter of 2020 primarily due to the significant increase in lab testing volume supplemented by the slight decrease in the proportion of test originating from RemoTraC another mobile phlebotomy services. For the third quarter of 2020 net loss was $2.8 million compared to a net loss of $1.8 million in the same period of 2019. Our net loss per share of $0.06 for the quarter compared to a net loss per share of $0.04 in the third quarter of 2019. Non-GAAP net income was $5.1 million in the 3rd quarter of 2020 compared to non-GAAP net income of $0.9 million in the same period of 2019. Our non-GAAP net income per share in the third quarter of 2020 was $0.10 compared to a non-GAAP net income per share of $0.02 in the same period of 2019. As a reminder, we define adjusted EBITDA, as a non-GAAP net income before interest, income tax, depreciation, amortization and other income and expense. For the third quarter of 2020 we recorded positive adjusted EBITDA of $5.6 million which is an adjusted EBITDA margin of 10% compared to adjusted EBITDA of $0.8 million and a margin of 2% in the third quarter of 2019. Net operating cash flow was positive $5.2 million in the third quarter of 2020 and we closed the third quarter with $214 million cash. As a reminder, in April, we see $20.5 million from CMS through its advance payment program. Based on recent CMS announcements we now expect CMS to begin to recoup this prepayment in April 2021. We are extremely pleased that in the third quarter, we were able to get our gross margins back on track after the impact of RemoTraC in the second quarter. And that we were able to deliver such strong adjusted EBITDA margin and positive operating cash flow, despite the continued investments that we've made across our operating expense line. As Reg mentioned, we have strategically invested in our future and have been on the offensive to drive growth and ultimately shareholder value. We'll continue to allocate capital with a focus on top-line growth by developing our pipeline and expanding our sales and marketing efforts beyond transplant centers by going direct to patients and community nephrologists. Turning to guidance, while we have seen many transplant centers return to some level of normality over the last couple of months. There is still much uncertainty surrounding the ongoing impact of COVID-19 on our business. And as such, we will not currently be providing revenue guidance for the full year 2020.

I'll now hand it back over to Peter to close out.

Peter Maag -- Chairman And Chief Executive Officer

Thank you, Mike. In closing, the third quarter was another record quarter for CareDx. despite COVID-19 affecting all aspects of our employees live, we continue to develop and deliver new and unique solutions to improve the lives of transplant patients and their caregivers. Over the past several months, our company has shifted into a higher gear and we will continue to keep our foot on the accelerator. CareDx has built a platform in transplantation which may shape the future of this exciting therapeutic area, in many ways. As an example, I would like to invite the investor community to our virtual meeting Innovation in Transplantation, on Thursday, November 5th on 1:00 to 2:30 PM Eastern. Finally, I would like to congratulate Reg, on his appointment to CEO and I look forward to working closely with him as well as the rest of the organization to continue to build CareDx into a powerhouse in transplant care. Thank you all for joining and we will now 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] The first question is from Brandon Couillard, Jefferies. Please go ahead, sir.

Brandon Couillard -- Senior Vice President

Hi, thanks. Good Afternoon.

Peter Maag -- Chairman And Chief Executive Officer

Good afternoon, Brandon.

Brandon Couillard -- Senior Vice President

Peter, clearly you've been at this a long time in the CEO position. Just curious if you could elaborate just why now is the right time for this transition. Reg I would be curious to know, if you have any potential changes in strategy or approach, perhaps, around the M&A that you might like to pursue? And Peter, do you think you'll pursue other opportunities outside of CareDx near-term?

Peter Maag -- Chairman And Chief Executive Officer

No, Brandon. Thank you so much for the question. I was joking a little bit with the team, I'm moving now from over-time to full-time on this position. I will continue to focus on CareDx. I'll be working with Reg on the next phase for the company, which I think is incredibly exciting.

Reginald Seeto -- President & Chief Business Officer

Yeah, thanks Peter. I mean, Peter and I worked very closely over the last few years on the strategy and the growth of the organization, and I've managed across all the business lines. I don't expect there to be any significant changes in the strategy. In terms of the corporate development, I've also been involved in all the different activities we've been doing over the last two years. So again, that's part of the normal path and course to what we've developed.

Brandon Couillard -- Senior Vice President

Thanks. And then a question Reg or Peter. You hired a significant amount of additional patient care managers in the period. Curious just if you could perhaps quantify the initial impact from those new hires and really how you think about potential utilization of these reps or productivity, either by tests or surveillance or centers as they sort of continue to mature I guess over the next few quarters?

Reginald Seeto -- President & Chief Business Officer

Yeah, thanks. I mean we see the PCM truly as a strategic asset which has played a key role strictly during COVID in our response with RemoTraC. I think some of the key things to note is that when our patient care managers actually schedule the patients, it's actually a much higher adherence than when the centers do it themselves. I think at the same time we're seeing a benefit from them having a direct relationship with the patient as we now move to offerings such as AlloCare. So really has been a real strategic asset for the organization. I think we're seeing the benefits of that as well.

Peter Maag -- Chairman And Chief Executive Officer

It should be noted that we have more than 5,000 patients on RemoTraC that's also been part of the reason why we've expanded with the PCM's.

Brandon Couillard -- Senior Vice President

Then maybe one for you, Michael. Any color you maybe share with as far as just kind of the investment plan, or opex outlook it's only just for the fourth quarter? It'd be very helpful.

Michael Bell -- Chief Financial Officer

Yeah Brandon. Throughout the year and I've mentioned it on the scripted remarks. We've continued to invest really on the research and development pipeline and also the sales and marketing. I would say for Q4, I mean you should expect us to continue that investment and continue to increase. I would expect sequentially, our operating expense to increase again in Q4 as it did in Q3.

Brandon Couillard -- Senior Vice President

Good, thank you.

Operator

The next question is from Steven Mah, Paper Sandler. Please go ahead, sir.

Steven Mah -- Paper Sandler -- Analyst

Great. Yes, good afternoon, everyone.

Peter Maag -- Chairman And Chief Executive Officer

Okay. Steven good to have you on.

Steven Mah -- Paper Sandler -- Analyst

Yeah, yeah. Congratulations. Peter. Yeah, it's been, it's been a great run. Congratulations for all you've done to build CareDx to where it is now. And I believe it's in good hands with Reg and a well-deserved transition for you to go from overtime to just working full-time, so so well deserved

Peter Maag -- Chairman And Chief Executive Officer

Thank you very much. Steven and you've been following the story for a long time. And there is so much opportunity yet as we are executing on those $2 billion, $2.5 billion TAM in kidney. And we are just in the beginning with heart and lung with so many growth drivers on the company. I am so excited of handling this over to Reg.

Reginald Seeto -- President & Chief Business Officer

Yeah, yeah. I know it seems like a good, it seems like a good timing. And, yeah, yeah, I think it's, I think it's great.

Steven Mah -- Paper Sandler -- Analyst

So yes. So maybe just moving on to questions. I know you've got, but the heart care decision. Do you have any indication on the heart care pricing?

Michael Bell -- Chief Financial Officer

Hi, Steven, it's Mike here. No, not yet. I think we mentioned, again earlier in the call that we are expecting to get the reimbursement news all the pricing by the mid -- middle of November, which is when this would go effective, but yeah, as yet, we have no, we've got no additional information.

Steven Mah -- Paper Sandler -- Analyst

Okay, great. And then on Kidney Care, could you remind us again on the timelines and when you're going to submit for Medicare reimbursement?

Peter Maag -- Chairman And Chief Executive Officer

On Kidney Care for reimbursement we are still continuing on with kidney care as part of OKRA. So it's part of our ongoing clinical study that we're doing at this stage.

Steven Mah -- Paper Sandler -- Analyst

Okay, got you, OK. And then finally, on RemoTraC. I know it's hard to predict what the steady-state level is as a percentage of volume will be and I know transplant centers have reopened but could you give us a sense of what you think the steady-state level will be going forward maybe in -- maybe in line a 2022 sort of like a post-pandemic run rate?

Reginald Seeto -- President & Chief Business Officer

Yeah, I think for our steady-state strategy we expect to be around the 40% mark. I think it's something that we're seeing that's a fairly relatively consistent number and also with COVID with these uncertainties there that would certainly lead to more RemoTraC usage as well.

Steven Mah -- Paper Sandler -- Analyst

Okay, got you. And the and can you give us a sense on how patient adherence has improved with the RemoTraC given continued COVID-19 pandemic issues. Can you just give us some color?

Reginald Seeto -- President & Chief Business Officer

Yeah, what we've seen is we scheduled patients with non-RemoTraC and RemoTraC and there has been actually an increase in adherence with the use of RemoTraC. And more importantly, when we actually scheduled patients through our patient care managers in this may have an increase versus what the centers do themselves. Patients, more importantly, they actually really like the offering, and I think that's one thing there has been a bit of a pull for them to actually do more of it, and that's one of the drivers. The ability particularly during this time to have a blood draw at time is really being a thing that's really compelling. I mean more than 9,010 patients really in the feedback have shared that this is they want to continue doing moving forward.

Steven Mah -- Paper Sandler -- Analyst

Yeah, and that's a sense I'm getting as well, Yeah. Yeah.

Reginald Seeto -- President & Chief Business Officer

We dont' say It to makes sense.

Steven Mah -- Paper Sandler -- Analyst

Compromised, yeah. Sorry.

Reginald Seeto -- President & Chief Business Officer

With the launch of AlloCare I think this enables additional point of direct patient contact as well. I think it's a nice patient continuum. We have obviously our patient demand is calling out these patients in transplant center also calling them when they leave the transplant center, but we also have now, a way of connecting patients through AlloCare as well as our digital patient app. So it's all part of the plan to continue this sort of interaction with the patient.

Steven Mah -- Paper Sandler -- Analyst

Yes, that makes a lot of sense. And maybe I can squeeze one last and one more and for Mike. Given RemoTraC, it's going to be significant part of the volumes going forward, I know the margins are impacted with the phlebotomy. Can you give us a sense of how you can get to your stated goal of 75% long-term gross margins? Thank you.

Michael Bell -- Chief Financial Officer

Yeah, Steven. And obviously this quarter and third quarter, we recovered really nicely on our gross margins back to where they were in the first quarter, so we sort of got over that RemoTraC already, and that increase that improvement in Q3 was down to the volume coming into the lab. And I think as we look going out is the volume continues to increase, then that's going to naturally drive improvement in the margins. But also we've got a lot of efficiency and optimization projects coming on in the lab at the moment, so that will drive that. And then of course on the top line and we've mentioned this before, as we get additional reimbursement and whether that's for AlloSure Heart or we get private payer reimbursements not coming through for AlloSure in Kidney as we drive the increase in average reimbursement that's also going to drop down to the gross margin any improvement. So I think we are feeling really comfortable that we can get to 75% gross margins.

Operator

We have a question from Alex Nowak Craig-Hallum Capital Group. Please go ahead, sir.

Alexander David Nowak -- Piper Sandler & Co -- Analyst

Great. Good afternoon, everyone, and congrats Peter and Reg on the transitions here. You've put up some really impressive growth during a tough quarter. We touched on a bit during the call, you mentioned, this is a culmination of all your investments you have RemoTraC more patient care managers out there, the focus on protocols. You also have to just the general push to go to liquid biopsy. But I was hoping you could kind of signal out for one of us is what is the most beneficial investment that you saw during Q3 generating the highest ROI in the quarter? And how do you think about that benefit continuing into Q4 and beyond?

Reginald Seeto -- President & Chief Business Officer

Yeah, I think the most recent investment we made is the patient care managers. We continue our DTP strategy. I think it's really important for us as we build that connectivity, not only within the patient transplant center but moving out in back into community is that sort of last mile. And I think what we've seen is particularly during COVID their response to COVID, the response to RemoTraC has been amazing and to the offering they like. I think now we're adding additional things as part of that suite to continue that relationship. so it's building that relationship with the patient. And clearly, that will start with the patient care managers way off of this premium white-glove service.

Alexander David Nowak -- Piper Sandler & Co -- Analyst

Got it. And to that point, are you starting to see the results of your investments within the community nephrology in this quarter, or is that all still to come?

Reginald Seeto -- President & Chief Business Officer

Yes, we've built out our community nephrology team and we're beginning to see some early benefits of that plan and strategy. We don't break out those numbers, but what we can say is that we're very pleased with the results that we've seen so far over the last three months.

Alexander David Nowak -- Piper Sandler & Co -- Analyst

Okay, got it. And then given all the advances that Medicare is doing to drive more kidney transplants. What should be the underlying growth rate of that market for the next several years in of all the programs that have been announced around kidney transplant and essentially moving people to perform a kidney transplant? What else needs to be done by either CMS or others to get to that doubling of kidney transplant in five years?

Peter Maag -- Chairman And Chief Executive Officer

And that's a great question, Alex. And you know, that's something that, maybe I am happy to take on a little bit to understand that dynamic better because there are very few industries where only 20% of the supply of the demand is actually met. But if you're thinking about for every transplant that we do there are five more that we could do if we had enough organs. And so there is this latent demand and increase of organs will tremendously accelerate life of patients and the entire industry and ultimately benefit CareDx as well. So doubling of the organs within five years, I think that is the stated goal. We probably had a bit of a curveball with COVID-19, but we see transplant centers already back to full swing and many transplant centers are actually above the previous year. So, I have no doubt that there is a lot of opportunity that we can do. Now, the most important element is that, number one, people go and donate organs, number two is that these OPOs, these organ procurement organizations are efficient and effective. And I think there is a lot of room to grow in the future.

Alexander David Nowak -- Piper Sandler & Co -- Analyst

That's great. And then just last question for me. It looks like we're entering what would be called the third wave here in the U.S. for the COVID cases with everyone's eyes and ears at CareDx focus on the transplant centers. What are you hearing about another wave regarding transplant volume so they were seeing more shutdowns or slowdowns like April and May? Or do they know how to better manage the virus now that transplants will continue?

Peter Maag -- Chairman And Chief Executive Officer

Yeah, thanks Alex. I mean what we're seeing is that region-by-region, center-by-center response and there's even some variability within locations and what we've found is they built that covering more than 150 transplant centers across the United States with really good insights into what they need and what. And I think in response to COVID, RemoTraC continues to be an offering where we have seen a continued increase more than 150 transplant centers today. So I think that ability to respond and react to the needs, has been really important for us to cross-sell different organs from kidney to heart and also lung.

Alexander David Nowak -- Piper Sandler & Co -- Analyst

That's great, I appreciate. Thank you.

Peter Maag -- Chairman And Chief Executive Officer

Thanks again Alex.

Operator

We have a question from Andrew Cooper, Raymond James. Please go ahead, sir.

Andrew Harris Cooper -- Raymond James & Associates -- Analyst

Hey guys, and congrats Peter and Reg. A lot of kind of the core has been covered. So maybe I'll take it a little bit of a different direction into the product bucket. Just as we think about, obviously your access to centers and to potential customers being limited. When we think about the European markets and the competitive environment in your access there, what's the path or how should we be thinking about the past or particularly obviously SG&A as you try to maybe move more into that European market in the first transplantation space?

Reginald Seeto -- President & Chief Business Officer

Yeah, on the product side, I think if you look at the typing business, I might just have that firstly that requires demos and demonstrations. I think what we've found there is we've shifted pretty much to what we've done the U.S. to virtual sort of a process. And I think that will be obviously more advanced and now that as we built in the best-in-class virtual marketing capability which has been recognized many about AlloSeq as well. So I think that's from the Viking business ex-US. I think in terms of cell-free DNA, we continue to have strong interest and I think this is an area where we continue to work with our KOLs influence, the benefit of having some direct infrastructure, particularly in Europe has enabled us to do that. The other thing is we had many of -- for the folks in the U.S. to keep in the leaders and support. We've actually been talking to their colleagues in Europe as well to make sure that this is a continuation of that information flow as well as why there is so much excitement about AlloSure and now translating ex-US in AlloSeq cell-free DNA.

Andrew Harris Cooper -- Raymond James & Associates -- Analyst

Okay, great. That's helpful. And then I know it was sort of brought up in a question already, but just as we think about kidney care. Sorry about that. As you think about kidney care, is there anything that you take away from the conversations you've had whether with potential customers or anywhere through the pipeline around heart care that have changed how you think about the potential for that product longer term?

Reginald Seeto -- President & Chief Business Officer

Yeah, I think that's -- I'll start to leading that because I think what heart care has been able to demonstrate is I think that we've been trying to push with further innovation as many of you know on the phone here we're the first to bring gene expression profiling to transplant. We're the first to bring cell-free DNA into transplant. I think as we look at the combination of the multi-modality approach. It's really, really important. In terms of heart care though that was the first approved three MolDx demonstration and for us it really validates AR approach we're showing that we can be a trailblazer. I mean, one thing that's never lost in CareDx is drive innovation, things that we do every day and it's the front of what we want to do as a company. So in that sense, translating that the kidney care, we've taken the same approach. And I think, in addition to the cell-free DNA and the gene expression profiling, we've also added the ability of iBox which is really validating algorithm in transplant flank that we believe will make a meaningful difference. In addition, we've also got UroMap and HistoMap these additional offerings that we're working on as well. So again this kidney care multi-modality is really the foundational basis in the future of transplant.

Andrew Harris Cooper -- Raymond James & Associates -- Analyst

Okay, great. And maybe just one more. After the, the equity raise earlier in the year as we can but you guys potentially being more active in the M&A landscape. Just any comment on sort of what you're seeing out there as some of it perhaps stress some players financially where more bubbling to the surface or anything we should think about in terms of where you may or may not be looking at? Any update would be great.

Michael Bell -- Chief Financial Officer

Yeah, I mean the thing with the equity raise, it got us to be at a ratio similar to our peers at least to the median. That's the first point I'd like to make. Secondly, we have multiple business lines, not just the testing services, but we also have the products and digital business and there are multiple opportunities over last two years that we continue to monitor and being discussed. So it's like that is part of our normal course that we believe that there remain to be attractive. We'll see what happens as we continue to monitor those.

Andrew Harris Cooper -- Raymond James & Associates -- Analyst

Great. I'll stop there. Thanks.

Operator

The next question is from Sung Ji Nam BTIG. Please go ahead.

Sung Ji Nam -- BTIG, LLC -- Analyst

Hi, thanks for taking the questions. And congratulations to both Peter and Reg. I was wondering about AlloSure Lung. Could you remind us what the market opportunity there is in lung transplant? Just trying to get a sense of how many bronchoscopy procedures did patients undergo for rejection monitoring in the first year and then following the first year?

Reginald Seeto -- President & Chief Business Officer

Yeah, we think of AlloSure Lung as similar size to about 3,000 patients in terms of that opportunity. Now with lung transplant patients, this is sort of one of the highest mortality conditions. And with that, there actually is a lot more testing in the first year. And so I think with the protocol frequency that we have sort of establishing is originally initially the 744 but we believe that maybe with some of the feedback we're getting that there is need to continue to some-- maybe even high as the balance is it looked at.

Peter Maag -- Chairman And Chief Executive Officer

Yeah. And just to reiterate what Reg was saying, lung has one of the problems that these patients don't live for the 10 to 15 years that we do in kidney and heart but they probably have a five year survive. So in terms of the tail, this is not as a big opportunity, but it's very exciting, because the unmet need is so significant. And so the publications that Reg was talking about, we have now three major publications on cell-free DNA or AlloSure in lung, which is very exciting. So I think it will be benefit of taking the existing platform, go into this field, which is very adjacent and might be able to quickly accelerate our lung.

Sung Ji Nam -- BTIG, LLC -- Analyst

Great, that's helpful. And the recent Medicare NCD announcement, which obviously was largely a non-event. But just kind of curious, is that something you guys might pursue in the future? Could there be any benefit from pursuing the NCD route?

Peter Maag -- Chairman And Chief Executive Officer

I think that the reimbursement landscape in Molecular Diagnostic continues to evolve. I think the company in general has had a phenomenal run in making sure that our products, our high-value diagnostics products and are recognized as such. I think we are very comfortable with the current approach to MolDx which is a data-driven approach and getting through the reimbursement through MolDx and then Iridium. But we will constantly evaluating other--other routes. So, maybe going dual-track one day might be an opportunity with a combination between the FDA and the central office--office approach. But right now I think the heart care reimbursement is really opposed to trials on how we have thought through combining our multi-modality offerings and we're very comfortable with the current approach.

Sung Ji Nam -- BTIG, LLC -- Analyst

Gotcha great. And then maybe a couple of quick ones for Mike. What was the AlloCell revenue contribution this quarter? And then would you be able to split the volume out what was the split of the report volume for AlloMap Heart versus AlloMap and for AlloSure Kidney this quarter or for year -- I guess year-to-date?

Michael Bell -- Chief Financial Officer

Well, first of all, on AlloCell similar to -- similar to the previous quarter, it's a bit less than $100,000. So, you know still early days yet for AlloCell and we hope to be announcing more on that as we move forward. Splitting out the volumes. Now I think the way that we look at testing services is in total commercial volume for both AlloMap and AlloSure. And so, yes, the volume was 21,800 for the quarter which was fantastic growth but no, we're not--we're not splitting that out.

Sung Ji Nam -- BTIG, LLC -- Analyst

Okay, sounds great. Thank you so much.

Michael Bell -- Chief Financial Officer

Thank you.

Operator

[Operator Instructions] We have a question from Yi Chen, H.C. Wainwright, please go ahead, sir.

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

Thank you for taking my questions. First question is which factor contributed more for the volume growth in patient results this quarter? Is a penetration in transplant procedures at each transplant center or patients becoming more compliant with surveillance protocols with RemoTraC?

Reginald Seeto -- President & Chief Business Officer

Yeah, both of being nascent levers for us but I think the hallmark of our growth has seen with the driving the protocols and we continue we are more than 50 protocols continue to grow each quarter. So, it's such as seems an opportunity for us for each center, develops the AlloSure specific cell-free DNA protocol.

Peter Maag -- Chairman And Chief Executive Officer

And maybe to add to this, you know Yi Chen, we are still early is still that there is new patients coming onto the platform all the time. So, we are right now depending on how you look at it 5% to 10% penetrated. So, the growth is primarily still driven by new patients coming onto the platform while at the same time Reg was mentioning with our patient care managers we might edge up on the compliance rate and the adherence. But right now our growth continues to be very dynamic by new patients being added to the platform.

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

Got it, thanks. Next question is sales and marketing expenses have shown a decreasing trend as a percentage of total revenue for the first three quarters. Do you expect that trend to continue?

Michael Bell -- Chief Financial Officer

I think that will continue, Yi. But having said that, when we will still be continue to invest in sales and marketing in that expense line grew sequentially in Q3 because we've added all of the patient care managers and we're still investing in that and we're focusing on community in nephrology. So I think it will still continue to grow maybe noticed fastest as the revenue growth.

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

Got it. Thank you.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back over to Peter Maag for closing remarks.

Peter Maag -- Chairman And Chief Executive Officer

Well, thank you very much for joining as we are building a tremendous powerhouse in transplantation. Thank you very much and looking forward to future discussions. We will keep you updated. Thank you.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Greg Chodaczek -- Managing Director

Peter Maag -- Chairman And Chief Executive Officer

Reginald Seeto -- President & Chief Business Officer

Michael Bell -- Chief Financial Officer

Brandon Couillard -- Senior Vice President

Steven Mah -- Paper Sandler -- Analyst

Alexander David Nowak -- Piper Sandler & Co -- Analyst

Andrew Harris Cooper -- Raymond James & Associates -- Analyst

Sung Ji Nam -- BTIG, LLC -- Analyst

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

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