CareDx, Inc (CDNA) Q3 2021 Earnings Call Transcript

Image source: The Motley Fool.

CareDx, Inc (CDNA 0.37%)
Q3 2021 Earnings Call
Oct 28, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the CareDx Inc. Third Quarter 2021 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Cooney, Vice President of Investor Relations. Thank you. You may begin.

Ian Cooney -- Vice President of 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, 2021. The release is currently available on the company's website at www.caredx.com. Reg Seeto, President and Chief Executive Officer; and Ankur Dhingra, Chief Financial Officer, will host this afternoon's call.

Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, expectations regarding coverage decisions, pricing and enrollment matters and our future financial expectations and results are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements. For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, October 28, 2021. 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 Reg.

Reginald Seeto -- President and Chief Executive Officer

Thanks, Ian. Good afternoon, everyone, and thank you for joining us for CareDx's third quarter 2021 earnings conference call. During today's call, I'd like to focus on how CareDx continues to [expand membership] in transplant. Specific topics to cover today include delivering another record revenue quarter, connecting the patient journey, progressing multi-modality across our sold urban portfolio, launching AlloSure Lung, leading with long-term data generation and developing new areas of partnership. During Q3, we delivered record revenues of $75.6 million, with growth of 42% over the prior year quarter. Notably, our Q3 testing services volumes grew 86% as compared to the year ago quarter. This result was achieved despite facing multiple headwinds in.

Operator

[Operator Instructions]

Ankur Dhingra -- Chief Financial Officer

Hello everyone. Apologies for the telecommunication issues here. So we will start right where Reg had to start off.

Reginald Seeto -- President and Chief Executive Officer

Great. Thanks. During Q3, we delivered record revenues of $75.6 million with growth of 42% over the prior year. Notably, our Q3 testing services volume grew 86% as compared to the year ago quarter. This result was achieved despite facing multiple headwinds in the form of delta surge and hurricanes. Transplant volumes and office visits in August were particularly impacted, so we've seen a return to more normalized run rate in September and into October. The primary driver of revenue growth was from our testing services, which increased 46% to $66.5 million.

CareDx provided approximately 40,000 AlloSure and AlloMap patient results, growing 86% from the prior year quarter. In addition, revenue from our products business increased 21% to $6.5 million, and digital and other revenues contributed $2.6 million to the top line. GAAP net loss for the third quarter was $11.9 million and adjusted EBITDA was positive $4.7 million. For kidney testing, we continue with our winning formula of protocol adoption and adding new centers.

As of the end of September, more than 70 kidney transplant centers in United States have now adopted regular AlloSure testing and more than 320 kidney centers and community practices were using AlloSure and mobile phlebotomy as a percent of volume maintained approximately at 40%. For heart testing services, the HeartCare attachment rate was 90%, highlighting the value of driving clinical utility through multi-modal innovation.

This was achieved in less than 12 months and underscores the importance of robust clinical data in driving adoption, generating data through multi-center prospective studies continues to be an integral part of how we develop data that can be relied upon by physicians in a real-world setting. For example, the foundational HeartCare study deal published in AJT captured 740 patients across 27 centers.

Others seeking to enter the space and not investing this magnitude of data generation and are focused on retrospective samples in one to two center studies as an opportunity entry point. What we've seen with HeartCare is the strong physician appreciation in data sets generated prospectively and across many centers. As of the end of September, greater than 130 heart centers and practices we're using our offerings.

We're executing on our 2021 theme of also connecting the patient on that transplantation journey, combining our patient care managers with our digital offerings such as AlloCare and TX Hero has helped increase engagement and improved adherence. Specifically, we continue to see robust uptake of our AlloCare app, which is now available in both the Apple and Android stores. In addition, TX Axis, previously called TX Connect, added 9,000 dialysis patient referrals to centers, and we now manage more than 38,000 patient referrals from over 1,000 dialysis practices.

Now on to multi-modal innovation, driven by the success of HeartCare, we continue to progress multi-modal approaches throughout our portfolio. We've invested over the last 48 months to build a portfolio of assets to be in a position to deliver incremental utilities. Beyond HeartCare, our organ care portfolio includes KidneyCare, lung care and LiverCare. For KidneyCare, we're rapidly progressing developments, highlighted by the recent peer reviewed publication, showcasing the clinical validation of AlloMap kidney in the Journal of Kidney360.

This 14 center study validated the ability of Allomap to differentiate between rejection and immune [Indecipherable]. Notably, it also showed that AllMap is complementary to AlloSure, delivering a combined area under the curve an AUC of 0.89. Together, these biomarkers offer a comprehensive assessment of kidney health compared to the current standard of care. Looking forward, we expect completion enrollment in the OKRA study before the year-end and plan clear lab validation. For LiverCare, we are now supporting the second largest cohort of patients after kidney. We continue to enroll patients in MAPLE, the Molecular Assessment and Profiling of Liver Transplant Recipients.

The first study to use the five modalities, including donor-derived cell-free DNA with AlloSure, tissue and gene expression with HistoMap and AlloMap, respectively, infection with AlloID, and artificial intelligence. MAPLE began enrolling early this year, and we look forward to updating investors on our progress in 2022. For lung care, the upcoming [AlloMap] study is our long-term multicenter prospective study of multi-modality in lung transplant patients.

Speaking about AlloSure Lung, we're proud to be addressing the significant unmet need in multi-modal transplant patients. Supporting lung transplant patients is absolutely critical as [Indecipherable] graft survival rates are the lowest among the transplant patients, with one in two lung transplant patients failing within five years. It was an exciting step forward for CareDx as a company on October 12 when we announced the commercial launch of AllSure Lung, marking our next step into being a pan organ transplant services company.

Regarding reimbursement, the team has been working very hard, and we're working with payers who are paying coverage for AlloSure Lung. We're pleased that AlloSure Lung is already covered by multiple private payers and address the key unmet need for these lung transplant patients. During the third quarter, we continued to demonstrate our global leadership in transplantation through peer-reviewed publications and by participating in and showcasing our latest clinical data. AlloSure Kidney is the only donor-derived cell-free DNA platform that has demonstrated long-term data. These benefits were recently highlighted with the better one year outcomes in the KOAR study shared earlier this year at ATC.

The ADMIRAL study abstracts also presented throughout the year have highlighted the ability to predict de novo DSA and TGFR decline. With upcoming publications, we're excited to provide further scientific evidence simply differentiating AlloSure Kidney from the data of other donor-derived cell-free DNA tests. The products represented two leading transplant conferences where we had a combined 14 abstracts highlighting more innovation. At the 47th annual meeting at the American Society for Histocompatibility and Immunogenetics otherwise known as ASHI, we presented our latest data on AlloSeq HCT and AlloSeq Tx 17.

And at the Annual European Society of Organ Transplantation, also known as ESAD, we announced the launch of our AlloSeq Cell-free DNA clinical and research service. We're excited to expand our offerings and support continued innovation and growth in Europe, especially at the launch of our HLA typing service, which we announced in quarter two of this year. We continue to engage with innovators and leaders across our business lines as we explore partnerships. Most recently, we announced an exciting biopharma collaboration with Eledon Pharmaceuticals, where they will use AlloSure to help assist the efficacy of their lead asset AT-1501 in the prevention of rejection in their upcoming clinical studies.

We are thrilled to create a new market opportunity for AlloSure, where we will support the next-generation of transplant therapeutics. On supporting innovation, I'd like to invite you to our Transplant Innovation Day during kidney week on November 5. Presentations will include DA Gros, CEO of Eledon; Dr. Bob Montgomery, who completed the first pig kidney transplant into humans, Dr. Enva Acklin on AlloMap kidney validation and Dr. Titte Srinivas on OrganXs largest independent validation in AlloSure.

Before turning the call over to Ankur to discuss the financials, I'd like to welcome Art Torres to our Board. Art has a long history of advocating to underserved populations both during his career and more recently as a board member for multiple impactful organizations. We are really excited to add someone of Artas set of experience and breadth of perspective to our board as we work toward building the future set of CareDx. I will now turn the call over to Ankur, who will review our third quarter financials.

Ankur Dhingra -- Chief Financial Officer

Thank you, Reg. We are very pleased with the business performance and our financial results for the third quarter of fiscal year 2021. Let me provide you more details. Turning first to the income statement. Total revenue for the third quarter of 2021 increased 42% year-over-year to $75.6 million. We see continued strong adoption for our testing services and products. Testing services revenues grew 46% year-over-year to $66.5 million for the quarter, driven by strong volume growth of 86% with both heart and kidney contributing meaningfully to this strong growth.

As Reg mentioned, and especially in August, we saw a reduction in both transplant volumes and testing volumes due to impact of hurricanes and the surge in COVID delta variant. These impacts prove transitory as testing volumes recovered in September. We also continue to see a higher growth in non-Medicare business. Overall, our business model of market penetration through addition of centers and patients continues to drive strong performance of our testing services business.

Product revenues increased 21% year-over-year to $6.5 million, driven by strong demand for our NGS products across all three regions. NGS now accounts for 55% of products revenue. Digital business revenues were $2.6 million, growing 6% year-over-year. Moving to gross margins. For the third quarter of 2021, GAAP gross margin was 67% compared to GAAP gross margin of 68% in the same period of 2020. The non-GAAP gross margin for the period was 70% compared to 70% in the prior year's third quarter. We continue to see strong volume growth in our testing services offerings and are investing to scale our capacity for higher volumes across all organs.

Non-GAAP operating expenses for the quarter were $49 million, up $3 million sequentially from last quarter. Our focus of increased investments is on expanding our R&D pipeline of new services for transplant patients, clinical trials to provide data on clinical outcomes, continuing to build our commercial capabilities and scale our infrastructure, commensurate with the size of our business. For the third quarter, GAAP net loss was $11.9 million compared to a net loss of $2.8 million in the same period of 2020. Net loss per share was $0.23 for the quarter compared to a net loss per share of $0.06 in the third quarter of 2020.

Non-GAAP net income for the quarter was $4 million compared to non-GAAP net income of $5.1 million in the same period of 2020. Our basic and diluted non-GAAP earnings per share in the third quarter of 2021 was $0.08 and $0.07, respectively, compared to a basic and diluted non-GAAP earnings per share of $0.10 in the same period of 2020. As mentioned, we continue to invest across R&D, clinical, commercial and infrastructure as we scale our business for upcoming larger pipeline as well as higher volumes of test.

As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization and other expense. For the third quarter of 2021, we recorded positive adjusted EBITDA of $4.7 million or 6% of revenue compared to adjusted EBITDA of $5.6 million in the third quarter of 2020. Cash, cash equivalents and marketable securities at the end of the quarter was $363 million. Operating cash flows were neutral for the quarter with a strong balance sheet position, our cash deployment focus remains on adding portfolio of products and services across the transplant patient journey.

Investing into this future is critical as we execute against our multi year growth plans. Turning to guidance. We are raising our 2021 revenue expectations to reflect our third quarter results and continued strong demand for our testing services. As of today, we anticipate a revenue in the range of $290 million to $293 million for the year. The guidance assumes the impact of sequentially seasonally less working days in Q4 and projects continued market penetration of our products and services.

We are building a pan organ transplant services business that connect the entire transplant patient journey. Our services and offerings are very well received by caregivers and patients. As the transplant partner of choice, we have a tremendous opportunity in front of us to provide innovative clinical and digital offerings across the patient transplant journey. We remain focused on realizing that opportunity. With that, I'll open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question come from the line of Matt Sykes with Goldman Sachs. Please proceed with your question.

Matt Sykes -- Goldman Sachs -- Analyst

Hi. Good afternoon, Reg, Ian. Congrats on the quarter. Maybe just for -- just for the first question, just on the guide, Ankur. I think if I look at the high end of the $293 million implies sort of sequentially flat in Q4. I think you mentioned -- I might have missed some of your comments about some seasonality there. But just wondering, is there continued uncertainty? Because typically, Q4 has been -- we've seen a sequential increase in prior years or just what your thoughts are in Q4?

Ankur Dhingra -- Chief Financial Officer

Sure. Let me lay out the range and the entire guidance. So at the midpoint of the guidance, about $75 million, roughly flat to what our Q3 results were. The way we're looking at Q4 is that there are two main impacts: one, seasonally -- certainly a lower number of workdays in Q4 potentially impacting some of the testing volumes. But that -- we expect all of that to be offset by our core business model of continuing to add centers as well as transplant patients into our business.

At the midpoint, we're projecting that, that would be an offset. Historically, especially if you -- last year was an odd year because of COVID. But prior to that, we've typically seen that kind of a seasonality. So that's one. The high end of the guidance, the high end of the guidance presumes that our business model will more than outstrip any impact from the lower number of working days in Q4, while the low end is the reverse of it.

Matt Sykes -- Goldman Sachs -- Analyst

Got it. That is very helpful, thank you. And then just on RemoTraC, Reg I know you mentioned that 40% utilization rate, which I think where you were last quarter. Just given the delta variant, did you just see more people getting used to sort of the COVD environment and going back in? Or how did you sense the RemoTraC uptake in this quarter with delta impacting that?

Reginald Seeto -- President and Chief Executive Officer

With RemoTraC we've sort of state to be around the 40% range and I think we've said that over the last four quarters. So what we see is a mix in the actual geographical locations where this takes place. So as with the rest of the United States, we see variations where there's more patients actually going back into centers and where there's more concern over the delta variant.

So that sort of played out in the overall mix. I think the impact of the delta variant and also some of the other natural disasters we saw during the course of this Q3 also led to a change in some of the actual days where there were patients going into some locations. So we know the southeast were particularly impacted during the period.

But the overall RemoTraC at this point that we see as a core offering continues to do well, but the mix and balance of where it takes place geographically will change, but we're looking about 40% for the last four quarters.

Matt Sykes -- Goldman Sachs -- Analyst

Got it and just one more for me. Just on the multi-modality that you've been pushing and the data that you've shown with the Kidney360 article and peer-reviewed study and everything that you've been showing.

I'm just curious, as you speak to the transplant centers and the various decision-makers in the ecosystem, how is that resonating? I would think with all this data that you're putting out that it's only increasing value, in that value proposition from multi-modality going forward?

Reginald Seeto -- President and Chief Executive Officer

Yes. Absolutely. I mean, the future of our field is multi-modality, and we've driven that sort of innovation. I think what you're seeing with HeartCare is an incredible, 90% attachment rate in less than 10 months. I mean you don't see that in any other sector or industry. And I think it's been driven by the fact that we do a really good data generation. It's easy to try to come in the space, but it's hard to actually bring meaningful value to physicians and practices. And that's why this multimodal has resonated so well.

I mean it's resonated well in market research. But more importantly, it's resonated in real world experience. What we saw, for example, as something tangible with the OKRA enrollment is we've always said that we would finish enrollment before the end of this year because the excitement behind this multimodal has been very clear because if centers had competing enrollment sites, they wanted to do OKRA first because it was just driving new innovation.

Some of these other studies we've seen being brought by the impetus sort of me-too offerings. The OKRA multi-modality really has sort of brought the excitement. And as we've sort of mentioned in the script, we now see this same sort of excitement in liver and also lung.

Matt Sykes -- Goldman Sachs -- Analyst

Got it. Thanks very much.

Operator

Thank you. Our next questions come from the line of Alex Nowak with Craig-Hallum. Please proceed with your question.

Alex Nowak -- Craig-Hallum -- Analyst

Great. Good afternoon, everyone. To start, let me comment on the lower -- can you comment on the lower ASPs in the quarter, if you take the testing revenue over volume, the price per test looks like it came down versus Q2. And the difference was pretty pronounced this quarter. So just curious, are you seeing any changes in Medicare billing practices? Or what else would really influence that test price lower?

Ankur Dhingra -- Chief Financial Officer

Yes. Sure. So a couple of aspects of that. One good observation, good question there. The -- so a couple of observations there. One, the -- our overall mix of business, as we see higher adoption, we're seeing much higher mix of growth in the non-Medicare part of the business. And so that's the, by far, the largest impact.

A lot of that is driven by you're seeing higher attach rates, say, on the AlloSure side, where our mix of coverage is much lower than the traditional kidney business, say. So that's one of the big contributors. To your specific question, any change in the billing practices? No, no change. We haven't observed anything on the Medicare billing practices, it's primarily the business mix, where the volume growth is exceptionally strong, but the mix continues to evolve away from the core Medicare business.

Reginald Seeto -- President and Chief Executive Officer

Yes, I think one other way to position this or think about is that we're seeing really strong margins with both kidney and AlloMap Heart, and that's built off what we've had previously communicated with great commercial coverage, both on the heart side and on the kidney side.

So what we're doing now as we've launched into new areas, particularly AlloSure Heart and AlloSure Lung. This provides -- it's going to be a different payer mix as we see as a result of that. But at the same time, it's important for us to drive leadership in this area, and that's why you're seeing this excellent volume growth, but at the same time, there's a bit of a change in the payer mix, which Ankur has shared and alluded to as well.

Ankur Dhingra -- Chief Financial Officer

It's certainly an opportunity for -- as we've talked about commercial pay as a multiyear opportunity that we have plans and focus around that continues to remain an attractive opportunity for us.

Alex Nowak -- Craig-Hallum -- Analyst

Okay. That is helpful, appreciate it. And then what's the latest with Medicare reimbursement on AlloSure Lung, seems like MolDX is certainly seeing some backlogs there? And then how are you thinking about the revenue opportunity next year from lung?

Ankur Dhingra -- Chief Financial Officer

Yes. So we remain in touch with MolDX on this and continue to work with them, both in terms of the pace as well as the information that they're looking for. So it will evolve. I don't -- we will give you an update when we have an update kind of thing.

In terms of 2022, we'll speak about the specific guidance in due cadence, but you're certainly anticipating revenue from lung in our year '22.

Reginald Seeto -- President and Chief Executive Officer

No, I think the only thing I'd add to Ankur's comments, as we look at the mix, particularly in some of the lung and also in heart, liver, where there's greater commercial coverage. There is more of a focus for us as well to build out that commercial pay strategy as well.

So I just wanted to reinforce that and that also reflects in the payer mix discussion. So clearly, the goal is to have leadership in all these different organ spaces that we've just described, but they have different payer mix. That's why it's important to have different strategies as we go along those. But handing back to you, sorry, Alex.

Alex Nowak -- Craig-Hallum -- Analyst

No, I was just going to say, on the 2022 side, I mean, the companies have been putting up some really strong performance. It's got a number of pipeline projects coming. So I'm just curious, as you're starting to think about the guidance going into '22, and again, I'm not looking for specifics, but how are you thinking about putting some of the puts and takes in there?

Are you focused on just given the core business growth? Are you going to be adding in lung and anything additional on multi-modality? And just trying to frame up what 2022 could look like for the Street?

Ankur Dhingra -- Chief Financial Officer

Yes. Let me frame that for you. And I think you're touching -- you're well aware of the stories. You're touching on some of the key points there are -- we've had tremendous success in AlloSure Kidney, AlloMap Heart and also AlloSure Heart this year and getting close to getting reimbursement for lung.

As we think about 2022, there are two distinct parts of that story, the core business, which is in the HeartCare and the core kidney. We expect our business model to continue to drive adoption, both across centers as well as in case of kidney, the nephrology settings. So that core business, we believe, can continue to drive meaningful double-digit growth.

On top of that, a couple of additional analysts would be -- the catalysts would be around lung becoming an additional contributor. And then at some point, kidney becoming an additional contributor. Now persistent with our typical cadence has been is that we typically provide estimates on our products and revenues when we get closer to the actual approvals and validations, et cetera. In case of kidney care, that will be sometime in '22. So -- but certainly a catalyst there coming in pretty soon.

Reginald Seeto -- President and Chief Executive Officer

So what I would say is, the point is -- [Indecipherable] spot on with inflection points. We saw that with the HeartCare [Indecipherable] AlloSure Heart in Q4 '20 and how that's driven meaningful revenue contribution in the course of 2021. I think as you look out in the outer years 2022 plus, that's why we've had this focus on the organ care type of approach, where I think as long as you bring clinical utility, I think that's the one point distinction make you have to bring clinical value.

And I think it's so often easy to try to come in this space. But the question is, can you make a -- some of it's meaningful physicians in terms of that clinical utility. And the good thing is we've looked at the entire landscape, and we're sort of -- we're sort of studying and shaping how we want to evolve that story and narrative in both heart and now in kidney and lung and liver.

So we have a very specific approach to continuing that clinical utility story. It's quite important to do that because in that way, you can keep on shaping what the reference stands are and also what true meaningful innovation is. We've had the benefit of conducting multiple inputs to vary boards, market research over the last couple of years. So we sort of have a good direct multimodal approach.

Ankur Dhingra -- Chief Financial Officer

Yes. The one thing I would add to that is we also view this as a multiyear journey, right, not just 2022, the core business, given where the current market penetration are, there's certainly a lot of runway in front of us for the next several years, not just '22.

Alex Nowak -- Craig-Hallum -- Analyst

Thanks for framing up and I really appreciate it. Thank you.

Operator

Thank you. Our next questions come from the line of Mark Massaro with BTIG. Please proceed with your question.

Mark Massaro -- BTIG -- Analyst

Hey, guys. Congrats on a good quarter. Thanks for taking the question. Looking back over the years, you guys have typically beaten -- or I should say, going from Q3 to Q4, you've typically come in about $2 million up sequentially from Q3 to Q4. Obviously, last year was different. I have to imagine you did better last year.

I imagine a lot of that might have been related to some pent-up demand and maybe the rollout of RemoTraC in Q4. But I guess I could use a little more clarity as to why the guidance came in probably a little bit lighter than I would have expected with this beat here in Q3. I mean, I guess, I haven't calculated the number of business days in Q4. But if you could maybe clarify what that is relative to the prior year.

And then you talked about volumes recovering in September as well as October. In your guidance, are you expecting any increase in COVID pressures in November and December? Or what other factors should we think about when we're updating our models here for Q4?

Ankur Dhingra -- Chief Financial Officer

Yes. Sure. Let me add some color there relative to the previous comments I made. First, nothing is changing in the business model itself, right? Our core business model, are driving market penetration through additional patients, additional centers, that's progressing quite well. And specific to your question, no new additional COVID newer headwinds relative to Q3 have been built into the model.

Now as a background, we've now raised guidance three times this year. Each quarter, we've had a beat and we've raised guidance as you get toward the end of the year, both the range narrows and the business beat begins to get built into the run rate and the expectations. I'm remaining cognizant of the fact that we've raised our guidance through the year by over $30 million now from where we started. And then that last $1 million is probably within the [Indecipherable] range to not trying to be too precise, myself here to get into a very specific, but nothing as such is changing in the business model.

Mark Massaro -- BTIG -- Analyst

Yes. That makes sense. I guess, building off of Alex's question, you guys did -- your revenue per test certainly declined what looks like. Let's talk about 5% sequentially. As we think about that going forward, I mean, where do you think that levels out? I mean, I would imagine that this may continue to decline sequentially for a little while as you're trying to get commercial payers on board.

But when we're thinking about our model for next year, I had a 1% decline for next year on pricing, revenue per test. Do you think it will look closer to the Q3 sequential decrease? Or do you think it's flatter than that?

Ankur Dhingra -- Chief Financial Officer

Yes, I'll probably give you a very more clear color when we get to the actual cadence of guidance. I can tell you for the purpose of my Q4 guidance, I'm embedding a business mix, which is similar to Q3. Right now, so I'm kind of carrying that forward into Q4. Now to step back, our expectation is when we launch newer tests, like AlloSure Heart has an impact.

And then AlloSure Lung, albeit at a smaller volume than the other market will have an impact. This will start with a much lower coverage on that too. So every time we launch a new test, it will have a period until we cover up on the commercial coverage.

Until we go back to our core, right, in case of AlloSure Kidney, in case of AlloMap Heart, where over a period of time, we've been adding coverage and have driven margins above 75% already. So these newer tests take a few years to get there. But for the purpose of Q4 guidance, I'm assuming similar mix as Q3 right now.

Mark Massaro -- BTIG -- Analyst

Okay. And if I can sneak one last one in. You guys have talked about being active on the M&A side. Obviously, you could double down in diagnostics, you could expand in products and digital health and services, but you could also potentially explore therapeutics or even devices. I guess, if you could help us think about what areas you're looking in and just your appetite for doing smaller things or maybe some bigger things.

Reginald Seeto -- President and Chief Executive Officer

Yes. Thanks. I mean I think in the -- anything that's on the transplant patient continuum is where we look at. So I think we're very post and in some cases, reentry, but the entire patient journey as you've seen at the start of this year, we made a foray, for example, into more the digital connection space with TX Axis previously called TX Connect.

And there we're now connecting close to 10% or more dialysis patients in United States, and we didn't have this offering at the start of the year. And so as you think of the appetite, it's, one is it's in transplant, too if it's on the patient journey, and I just gave an example, the digital type of connection.

I think if you go into the partnership, we described with Eledon, that's one where we feel that's a natural way of extension of how do we get involved in thinking of new therapeutics coming to space that's with leveraging our current platforms as well. You've also seen what we think as not just solid organs, but stem cell and cell therapy is that the transplant continuum.

But if you look at M&A overall or if you look at partnering and licensing or you look at sort of creative types of collaborations, it's anywhere along that pre- post continuum, and it would involve, whether it's therapeutics or whether it's med tech or whether it's digital or whether it's other diagnostics.

But essentially, our goal is to connect all these patients, right? I mean, I think our mission is so simple, right? How do we improve outcomes with innovative solutions? And then how do we become the leader in transat ecosystem. So these are our core imperatives. So I think anything along those lines is sort of fair gain.

Mark Massaro -- BTIG -- Analyst

Excellent. Thank you very much.

Operator

Thank you. Our next questions come from the line of Andrew Cooper with Raymond James. Please proceed with your question.

Andrew Cooper -- Raymond James -- Analyst

Hey, everybody. Thanks for the questions. Maybe first, just on loan. When we think about maybe this process taking a little bit longer than some of us had thought or then some other processes we've seen under kind of the universal LTVs.

Is there anything in particular that MolDx is asking for? Or is this just, hey, they're kind of backed up as we've had a lot of things coming through the system? And then is there any impact to any of that in terms of how we should think about lung and -- I'm sorry, liver and kind of additional organs coming through kind of on a go-forward basis and what the time lines might be from the tech assessment side of things?

Ankur Dhingra -- Chief Financial Officer

Yes. I would -- as we've said, this is the first time now we're going through the new LTV process and out in work with MolDx. At this point, yes, I wouldn't project any of that to the upcoming products that we would take through MolDx, whether it is what upcoming kidney care or otherwise.

We are in touch with them right now, and it's generally understood as to where they are at and providing any information that they're looking for. Having said that, I thought by repeating that at this point, we know nothing to that would impact any of our future submissions. We'll go through this process and when we file the next one, we'll probably set the expectations at that time.

Reginald Seeto -- President and Chief Executive Officer

Yes. The only caveat I'd give is that when we submitted all the materials as under the old system, and I think then that all the future submissions under the new system. So I think there's -- we would have clarity on the guidelines and expectations there.

Andrew Cooper -- Raymond James -- Analyst

Great. I just wanted to make sure. And then maybe one last one, sort of on price and mix. But when we think about the adoption of AlloSure Heart, we've always sort of talked about 25%, 30% of that market being Medicare, the remainder, largely commercial. Are you seeing more ordering from the commercial side of things?

And maybe that's part of what's playing into things relative to that 25% to 30%? Or is there anything maybe on the accounting side? Is it cash accounting [versus] accrual? Just anything else to consider in that ASP dynamic?

Ankur Dhingra -- Chief Financial Officer

The -- so the ordering side is always from the center, right, when the actual order or the patient is submitting an order or the doctor is submitting an order, it doesn't matter to them what the -- whether it is a Medicare or other insurance, right? So we can't specifically point to a front-end system grinding the change in the mix, it's just that the kind of tests and the volumes that we see happen to be more on patients that have different coverage than Medicare.

The -- our revenue recognition process does take into account the collectibility, the contracts and all of that and assumes a higher risk and hence taking a slightly lower revenue on non-Medicare business. So there are computations there based on our assessment of the collectibility, et cetera. So once the -- once the commercial mix goes higher, it does lead to lower revenue per test.

Reginald Seeto -- President and Chief Executive Officer

[Indecipherable] the AlloSure Heart and the attachment rate has gone up quite well in a very short period, which we sort of highlighted. I think that is a true testament of clinical utilities. So I do think the team is actively working their commercial coverage.

But if we go back to where we were in Q3 last year before AlloSure Heart and now we look at where we are today is being significant dent in the mix. Yes, we changed the mix, just given the success we've had. And I think it's sort of, in some ways, the success you've had in driving the attachment rate to 90% in less than 10 months is sort of incredible in many ways.

Ankur Dhingra -- Chief Financial Officer

We have dedicated teams that we are adding more capabilities and continue to focus in our discussions with commercial payers to get the contracts, continue to publish additional clinical utility data to be able to drive those negotiations. That is the opportunity for us.

Andrew Cooper -- Raymond James -- Analyst

Okay. Very helpful. As always I just want to make sure it's traction and some things that are early, not anything else going on. And then just last one for me, just when it comes to some of the areas you felt headwinds from delta and hurricanes.

Were there any products that were impacted more than others? Do you have any sense for that or pretty evenly throughout sort of the U.S. and largely on the testing services side pretty evenly. Just want to make sure if there's any dynamics there?

Reginald Seeto -- President and Chief Executive Officer

Yes. It was definitely on the testing services side. And I think where we saw both testing services, both heart and kidney impacted from particularly the month of August. This comparison in the second quarter, we didn't see any business that is impacted by what we call natural disasters, but certainly in Q3 and also in Q1, we've seen some as well, but probably Q3 was particularly [Indecipherable] the month of August.

Andrew Cooper -- Raymond James -- Analyst

Great. I'll stop there. Appreciate the questions.

Operator

Thank you. Our next questions come from the line of Matt Stan with Jefferies. Please proceed with your question.

Matt Stan -- Jefferies -- Analyst

Thanks for taking my questions. Just to stick with that theme there. Is there any way you guys can help us quantify the impact of both delta and weather to revenues in 3Q? And then just to confirm, did you pick up or catch up any of this at any point in September? Or are you expecting to pick up or catch up that here in 4Q?

Ankur Dhingra -- Chief Financial Officer

Well, it's hard to quantify that. Very specifically, it was kind of regionally focused. We did see a trend shift, but harder to specify that. In terms of -- it's a transplant test. So our view is, generally, the business gets pushed out. So if a patient had to go through a test in August and they ended up going in September, then the whole sequence of tests get pushed out, right, it doesn't create a pump or say, this is our thinking right now.

Matt Stan -- Jefferies -- Analyst

Okay. That is helpful. And then can you just clarify what HeartCare testing volume was in 3Q? I think you had given that number in 1Q and 2Q. And sorry if I missed it here for 3Q. Thanks.

Ankur Dhingra -- Chief Financial Officer

Yes, we provide -- I think the -- we started providing that data when we launched the test originally and the thinking was to give it for a few quarters until the run rate is understood. But then for competitive reasons, would be -- we wouldn't be disclosing that specifically or splitting it out in that level of detail.

Matt Stan -- Jefferies -- Analyst

Makes sense. Thank you.

Operator

Thank you. Our next questions come 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 questions. My first question is, with the competitors cell-free DNA Lung test launched recently, how do you plan to better position AlloSure Lung in the marketplace? And can we expect to see some head-to-head comparison data in the future?

Reginald Seeto -- President and Chief Executive Officer

Yes. I mean, with AlloSure Lung, we're excited because we've had this in the marketplace starting in 2019. It's an area where, particularly in 2020, we saw the significant unmet need [Indecipherable] code where centers actually reached out to us to create the reference standard. And in addition to that, working with, let's call, the graft consortium. How do we now define the different protocols as part of that sort of adoption. So I think as the leader in the space, we were reached out to and we are asked to help create this sort of reference standard.

And it was really exciting and privileged to be part of that sort of equation. As we mentioned, part of our goal is to be the leader in the transplant ecosystem. That's really important for us. And as we look now moving forward on to different studies, [Indecipherable] studies haven't been done. Point is that we do get real clinical scientific data, and we'd be looking at ways of real world events.

I think [Indecipherable] what we've seen others do is what we call this retrospective, single center study. Again, that's not a thing we advocate, it's not things that we do because we know from our experience, nine out of 100 doctors want to get a multicenter prospective study. Very few people want this single center approach or actually just looking at retrospective samples. So I think what we've seen from others is a retrospective analysis, again. So from a single center, I believe.

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

Okay. My next question is, what percentage of the testing volume is based on new transplant patients?

Reginald Seeto -- President and Chief Executive Officer

Yes. I think what we -- yes, we have not shared those, but what we look at new sites, how many of the new sites do we get. So I think we've always said that one in two new heart transplant patients started a cardiac offering and one in three patients in the kidney side allocate its offering.

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

Okay. Last question. Do you have any information on how many transplant procedures have to be rescheduled or canceled among transplant centers that are clients of CareDx due to the center's COVID vaccine mandate for the recipient and the donor?

Ankur Dhingra -- Chief Financial Officer

Yes, that's where we can specifically speak to the volumes tied to transplant recipient and donor. But in aggregate, we can tell you that if you look at the overall transplant volume this year, first half was very strong from a year-over-year growth perspective, and the Q3 was sequentially down about 5% from Q2, just the overall transplant volumes.

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

Alright, thank you.

Operator

Thank you. There are no further questions at this time. I would like to turn the call back over to Reg Seeto for any closing remarks.

Reginald Seeto -- President and Chief Executive Officer

Yes. Thanks again for all the folks on the phone. I mean, I think without a doubt, this is really a strong quarter and one where I think we're really pleased to be able to talk about what we do for transplant patients. And as we look forward to a strong, again, another strong to the end of the year. One thing I'd say is I hope everyone has a happy Halloween. My kids often remind me that, that's one thing I should say because it's another milestone in life. So everyone, make sure your kids to go out with them, and have a great Halloween. Thanks again.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Ian Cooney -- Vice President of Investor Relations

Reginald Seeto -- President and Chief Executive Officer

Ankur Dhingra -- Chief Financial Officer

Matt Sykes -- Goldman Sachs -- Analyst

Alex Nowak -- Craig-Hallum -- Analyst

Mark Massaro -- BTIG -- Analyst

Andrew Cooper -- Raymond James -- Analyst

Matt Stan -- Jefferies -- Analyst

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

More CDNA analysis

All earnings call transcripts