CareDx, Inc. (CDNA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and good afternoon. My name is Veronika Dubajova. I'm the Med Tech Analyst at Goldman Sachs in London. And it is with great pleasure that I am joined this morning by the management team from CareDx. Thank you very much, guys, for being here. We're delighted. Before we start, I just want to draw everyone's attention to some of the disclosure statements that you can see on your webcast page. So please, I just wanted to make sure everyone was aware of those. And I do have to mention that CareDx is not a company covered by Goldman Sachs, so that my compliance people don't get upset with me. The format for the session this morning is going to be Peter and Michael will walk us through some slides. And after that, we will open it up for Q&A. If you'd like to submit a question, you can do so either through the website or you can e-mail me at [email protected]. And with that, Peter, Michael, thank you for being here and the floor is yours.

Well, Veronika, thank you so much, and thank you so much for the Goldman Sachs and the team. I hear that there are 4x as many participants in today's conference. What a testimony to a new platform and a new reality. We at CareDx continue to do what we do. We focus on transplantation. Transplantation is all what we do. Here on this page, you see actually an organ recipient, a transplant donor, organ donor, as well as the primary caregiver on 1 page, making testimony to CareDx focusing on the entire transplant ecosystem. So transplantation is all what we do, and we do that with great success along the entire transplant patient journey. On this page, you see on the left-hand side that we are engaging and supporting transplant centers with waitlist management. We also have the best-in-class HLA typing solution where you're matching organs with recipients. On the right-hand side, after transplantation, you see our powerful engine, AlloSure, our donor-derived cell-free DNA liquid biopsy test, which is really transforming the post-transplant surveillance. iBox clearly has access to the latest in prediction on artificial intelligence and post-transplant care in terms of understanding how long this graft or the organ will last in the patient going forward. And then you also see with AlloMap, our gene expression profiling, blood test, simple diagnostic test; and AlloCell, our new product for cell therapy monitoring, a very powerful franchise in transplantation. Similar to Flatiron and Foundation Medicine, CareDx also has an electronic medical records outlet with more than 60 transplant centers are using our electronic medical record. With our XynQAPI solution, we are also managing for many transplant centers, their quality submissions. And all this on the backbone of incredible dedication to clinical trials in many, many transplant centers around the world. We have built CareDx into a powerhouse of transplantation with very smart business development activities. What you'll see on this page is a summary of all the activities that happened within the last 10 years where we have built and transformed the company based on very smart IP on donor-derived cell-free DNA, based on access to transplant centers. And based on forward-looking activities that will really last and transform the company in a very substantial way going forward. So what we have done at CareDx, our growth story is we have transformed from a single-product company focused on heart transplantation and gene expression profiling with a TAM of $150 million, have then moved now into a multiproduct offering with solid organ with all sequencing-based multi-modality testing, really a focus on U.S. transplant center and a TAM of $2.5 billion. And now we're making that next step of being the transplantation all transplant powerhouse with testing and services combined. We're focusing on global medical institutions because the transplantation is performed in the leading medical centers in the world. We truly have ecosystem partnerships. And then we are looking forward to a very strong patient engagement model within the company as well, addressing a TAM of $10 billion going forward, really transformed the company from single-product into an all-transplant company. What you see here on this page is that we have a very deep center of penetration as we are the leading partner in U.S. transplant centers already. We have very strong clinical partnerships, and we all do this with a very strong focus and very disciplined way of defining our leadership indicators and executing on this launch path with our new products going forward. Now this is on the backdrop of very strategic investments in clinical trials. CareDx is running large multicenter clinical studies with an incredible dedication and an incredible team on clinical science. We have more than 40 investigator-initiated clinical trials running with the leading medical institutions in the world. And then the leading investigators in the world also are receiving grant supports. Together with the transplant societies, we have been building an incredible strong network in the transplant ecosystem with our grant support. Now this is a page where I wanted to draw your attention to because it's really a start of a new era. You hear that cell therapies is really the focus of the future in medical science. And why not apply the CareDx technology to this emerging field of cell therapy? For allogeneic cell transplant, CareDx can measure the persistence, but also the max peak concentration as well as engraftment with our technology. So AlloCell will be a strong support, potentially using our existing surveillance platform for transplant patients and providing that to cell therapy. We see cell therapy nothing else than an allo transplant, especially on the allogeneic front, where you're basically transplanting a foreign cell into a recipient, so this is very applicable to what we're doing at CareDx. On this page, I'm handing over to Mike Bell, our CFO. Mike?

Thanks, Peter. This page really highlights our significant growth over the last few years. On the left-hand side here, you can see our testing services patient results, which is basically AlloMap and AlloSure. We launched AlloSure in October 2017. And you can see since that time, we've had really strong growth on the testing services patient results. That, of course, has translated into revenue. You can see that in 2019, our total revenue was $127 million for the year, so 66%, very strong growth, both in 2019, 2018. And also, you'll see in Q1 of 2020, even with the impact of COVID, we had very strong growth again in Q1. And that revenue growth and volume has translated into significant improvements in our margins. You can see on the left the gross margins. In 2019, we had an increase from 61% to 68% in gross margin. And again, we've seen that carry through into the first quarter of 2020 with a 71% gross margin. And then, of course, the growth in revenue, the improvement in gross margins has translated down to the bottom line. And you can see that adjusted EBITDA in 2019 was positive. In fact, in Q1 of 2020, that marked our seventh consecutive positive EBITDA quarter. And of course, that's also then translating into cash flow. And we're a company with very strong cash and balance sheet position, and we're not burning cash on the operating of the business. Peter?

Well, thank you very much. And Veronika before turning back to you is 2020 is going to be an incredibly exciting year. As with AlloSure, we continue to go deep in our U.S. centers and we're expanding into the community nephrology setting. So a very strong growth year for AlloSure as we continue to see adoption. Right now with AlloSure, we only penetrated 5% to 10%. So we have ample room to grow on our AlloSure franchise. On AlloCell, we're looking for closing as many pharma partnerships as we think right now, this is the time to actually lean in and make sure that we have as many pharma partners on our AlloCell offering. On our products business, obviously, COVID-19 is a little bit difficult right now for the second quarter to launch, but we're in a tremendous launch phase with AlloSeq cell-free DNA, AlloSeq Tx 17 and AlloSeq stem cell, it's really an opportunity for us to grow internationally and expand our franchise even into Asia. And then on the digital business, with our OTTR acquisition, we are continuously driving inclusion into electronic medical records, supporting our testing services business as well as now rolling together with Cerner, out on the Veteran Affairs electronic medical record. So we'll be the support function for transplantation in many VA hospitals around the U.S. And then on AlloCare, we launched patient engagement and patient engagement app will be incredibly important for us this year to make that next step into a patient setting. So very excited to look into 2020 and all the launch activities that we have. Now over to you -- back to you, Veronika. Very, very appreciative of having the opportunity to talk to you today.

No, thank you, guys. And there's so much to cover, and I want to make sure that we touch upon all the important bits of the business. But maybe we can start and get the COVID update that we've all been waiting for out of the way at the beginning. Just curious, sort of what are you seeing in terms of transplant activity? How does June compare to May versus April versus March, if you can give us a sense? And as you look forward, what's your best guess right now for when transplants get back to kind of normalized volumes at this point in time?

Yes. No, within transplantation, we have seen what I would call a swish recovery. I heard this morning the term Nike swish where we -- if you exclude Northeastern New York, we're back to where we were in the -- before the COVID in terms of number of transplants performed. We had 470 transplants performed last week. So if you exclude the New York transplant centers, we're back at pre-COVID levels. Maybe with -- it took us a while to get there. But as of last week, we're almost back to pre-COVID level. In terms of surveillance visits, we're back on track in terms of overall performance of the company, and surveillance visits being the key metric for us in terms of the testing service opportunities, making sure that we care for patients. Mike, did you want to make a comment?

Yes, Veronika. From the business side of things, what we saw in late March was a significant drop-off in testing services volume. And that continued in the first couple of weeks of April. But then -- but by the end of April, we were back to pre-COVID levels, and we mentioned that on our earnings call a few weeks ago. And then what we've seen through May and the first part of June is that we've been consistently at or above those pre-COVID levels. So I think a very strong comeback from the business and continued strong performance.

Okay. And maybe as sort of as a follow-up on that, Mike, what would you need to see for you to feel comfortable to bring back some sort of a guidance for the year at this point in time?

Yes. We withdrew guidance back in early April, and we really didn't know how this was going to trend. I think we started to see some positive trend. We'll be releasing our Q2 earnings late July, early August. I think if we continue to see a positive trend and we have good line of sight, and we don't think that there's going to be any future impact then, we'd probably be comfortable issuing guidance for the remainder of the year. But I think we just have to see where we are at that point in time. We'd like to give guidance, but I think we'll just -- we'll have to see -- continue to see that positive trend.

Veronika, maybe to even expand a little bit on this, we withdrew guidance because of 3 reasons. The first one was, we didn't know how transplant volumes will develop. The second was we didn't know how our program RemoTraC, and I'll get back to that in a moment because I think it's very important to understand RemoTraC, our offering of mobile phlebotomy, is kicking in. And the third one was we didn't know if there will be a second dip in the second half of the year. And we still don't know the second half of the year. We don't have a crystal ball on the second dip. But what we anticipate now talking to many transplant centers that we probably will not see one single dip in the United States in the second half, but we anticipate that certain transplant centers will experience some uprise in COVID. And obviously, for us, it's very difficult to tell if this COVID uprise would be L.A., which is a significant transplant region for us versus if this uprise is in the middle of the country in not a such strong transplant center volume region. That would be a difference for us to be able to forecast. I did want to make sure that I quickly talk about RemoTraC. RemoTraC was borne out of the necessity of a phone call at midnight from a transplant center in New York, said, "Peter, how can I continue to support our transplant patients as they cannot come into Manhattan and visit our transplant center?" And so the CareDx team came in and said, "How can we provide mobile phlebotomy services to these patients that are now need their regular surveillance visit?" And we constructed an offering where we're not only testing AlloMap and AlloSure, but we are also testing all blood-based information required by that center and provide that back by a mobile phlebotomy or a home blood draw solution called RemoTraC. And within very short period of time, 150 transplant centers had the same issues, and we were partnering with them to provide this mobile phlebotomy service. And that is now, right now, as we speak, I think I look at the numbers yesterday, and 50% of our volume is now mobile phlebotomy. So an incredible leaning in of the entire organization caring for patients and making sure that we stem together the COVID crisis with the transplant community.

Yes. And that's actually a really good sort of segue into my follow-up question, which was kind of structurally, do you see any changes that you expect to your business as a result of COVID, either in terms of transplantation volumes long-term or how you need to operate from being mobile versus static if that's the right term?

And Veronika, it's hard to say that I think -- I don't want to use the word we benefited from COVID-19. But in the context of accelerating megatrends that we have seen and CareDx is part of, absolutely, we see an acceleration in the sense of telehealth visits. Now clinicians want to have their blood-based information on their screen when they have a telehealth visit. So CareDx providing this blood-based information is an incredible partner in making sure that that happens. In terms of integration into the electronic medical record, making sure that these results are actually at the fingertips of the clinician, we absolutely see that this has been accelerated by COVID-19 through this telehealth notion. By thinking about how to stratify your patient population, now clinician actually take a step back and said, which patients should I see and intensely care for. So having predictive analytics that we offer with iBox is even more important than it has been in the past. And then being able to be integrated and understand the workflow, being a real partner with transplant center, that has become even more important because the logistics are actually quite complex, as you can imagine. These transplant patients sometimes live 3, 4, 5 hours away from the transplant center and being able to be that logistical provider and supporter, we have actually hired and doubled -- quadrupled actually our patient care managers in the last 6 weeks, making sure that we can outreach to the community and catch these transplant patients. So in that sense, COVID-19 has really accelerated our business model. And I think it also has created a lot of goodwill in the community. So in a way, I think CareDx has been accelerated by COVID-19.

Okay. That's fascinating. Well, let's maybe talk about the building blocks of the business, and I want to start with AlloSure. Just curious to understand, kind of give us an update on where we are penetration wise, both in terms of the number of centers that follow the protocol, but also within the center, sort of is your -- is AlloSure used for every single patient? And if not, why not? Just give us a little bit of an update on where you are with that.

I think, in a way, AlloMap, our heart transplant monitoring tool, is setting all the standards, has been around for 10 years, and we can track the progress of AlloSure along the AlloMap time line, which is AlloSure is breaking all the records, but I think it's still important to keep an analogue in mind. AlloMap is about 30%, 40% penetrated against the $150 million TAM. AlloSure is only 5% to 10% penetrated against this $2 billion TAM. So in that sense, we have ample room to grow. Even if competition were to have some inroads, I think there's many -- there's a lot of room for many in the donor-derived cell-free DNA space for post-transplant care. I recall 5 years ago, when I talked about a $2.5 billion TAM in post transplant, I received a lot of eyebrows. Now there are many and looking at this and saying, wow, it looks like this will be a $2.5 billion TAM in post-transplant care. And AlloSure is, as you mentioned, already in 170 transplant centers, which, out of the 230, is an astonishing number within only 2.5 years post launch. It continues to be. And I think you're getting to this. Our growth opportunity is now that we are in centers is actually getting all patients on protocol. And transplantation being a somewhat conservative setting, they would always use a new technology in the patients that are maybe the high-risk patients to learn. We actually provided that learning platform with 55 transplant centers and 1,500 patients being enrolled in a 3-year surveillance trial called K-OAR where we established a protocol that says 7 surveillance visits in the first year, 4 in the second and 4 in the third. So 15 surveillance visits over the first 3-year period. And what we're learning is -- and that's not a surprise for those that are working in the field is that these tertiary care hospitals in the United States are doing a great job in doing procedures, transplant procedures, but maybe they're not perfectly equipped to have the long-term follow-up to make sure that they're really receiving these surveillance visits. So only 60% to 70% of these surveillance visits are coming in, Veronika. Now that -- I don't see that as a problem. I see this as a tremendous opportunity. If we can care for these patients on a very regular interval, we'll be improving care and long-term outcomes. So this is a great opportunity for CareDx.

And how do you convince a physician to move to the protocol? What are sort of the hurdles? You said part of it is complexity of the condition of the patient. But what else do you think you need to do to get more physicians to use the protocol?

Veronika, great question. And it sounds very simple, but it's very hard. So the first one is clinical conviction. You need to have the right clinical data, the right publications and the right passion in order to convey that clinical conviction. The second one is to be part of the workflow. It's incredibly important that it's easy for the clinicians to use. And the third one is because these medical centers are -- there's not an international guideline for transplantation that is really adhered to. So every center is setting their own protocol. So being in a protocol. So once we have clinical conviction, we make it really easy for them to use. In a perfect world, we are integrated into the electronic medical record, so you can order AlloSure on a click of a button. And the third one is we need to build consensus within a transplant center. Sometimes there are 15, 20 clinicians, nurse practitioners and coordinators that need to sit around the room and have built a consensus around a protocol. And that actually takes time. These protocol cessions sometimes only takes place twice a year in some transplant centers. So this is where many ask us, why are you not in more protocols? While it has taken AlloMap almost 7 years to get to 90% of protocolized use in transplant centers in the U.S. So this will take some time as these transplant centers are adopting novel technology.

And do you think there's potential for COVID-19 to sort of push more people towards adopting AlloSure as opposed to doing physical biopsies?

Veronika, I think that's a question where I think I should have said the COVID-19. No, the value proposition -- you're giving me a layup, thank you. No, because the value proposition of an invasive biopsy where a patient has to come into a transplant center, spend almost a day because of the bleeding risk and other issues on biopsy, and you can replace this through a liquid biopsy through a simple blood test. It's completely obvious. And in the past, I have heard many, especially on the cardiology side, where they do 18 biopsies in the first 2 years after transplant, they're saying we're always hesitant to replace biopsy through a blood test. And now with COVID-19, we have jumped and moved towards a blood-based monitoring tool. So I think this is incredibly exciting. And again, amplify -- COVID-19 amplifies our value proposition to clinicians.

And how are you thinking ultimately? I mean, if we look at your business in 5 years' time, what do you think that AlloSure penetration rate is going to be? What's the shape of that curve if you model it based on what you've seen on AlloMap?

Well, the transplant adoption curves, and you can see that through many products, is actually a linear adoption curve. And this linear adoption curve will just continue to go as we are penetrating more centers, more patients, as we're moving into community nephrology. I think we are modeling a linear adoption curve that is going for quite a while. Our business is tremendously sticky. About 75% of our revenues are associated with patients that are on a surveillance protocol that we know already. So in that sense, a linear adoption model is what we see. Overall, AlloSure franchise could be a $600 million franchise for us if we compare that to AlloMap. If kidney is an indicator for -- sorry, is following our heart levels, we'll have AlloSure at a $600 million level, which would be fantastic for the company. We're building around AlloSure now a tremendous mode in transplantation that allows us to have many, many touch points that even goes beyond the AlloSure revenue that allows the company to continue to accelerate.

Okay. And any thoughts on competition, I know Natera has gotten a product out there. Are you seeing some pressure competitively? Centers switching away from AlloSure towards their solution? How do you think about the threats there?

Well, I think competition keeps us on our toes. It was great. I think I always said that with AlloMap, it's a great, great product. The one problem was that we didn't have competition. We have no competition on the heart side. So it didn't keep the company as on the toes as it might have need to be. On AlloSure, we're on our toes. But it's also true that COVID-19 is maybe not the perfect time to launch products. So we think that our first-mover advantage now for 2.5 years has allowed us to build a tremendous platform in transplantation with a tremendous recognition of AlloSure and CareDx. We are an entirely transplant-focused company versus others are maybe saying, we have an assay that we can use for this as well. CareDx is providing an entire service and testing service module that allow us to interact with these transplant clinicians, which we think is incredibly important because this is a market where we are just at the beginning. Transplantation is only in the beginning in terms of blood-based information. So it's not going to be a single assay. It's going to multi-modality with multiple testings that allow to stratify these patient populations.

Okay. And I know you're working on getting reimbursement for AlloSure for heart. Give us an update on where that process is, any risks of delays? And then what's the TAM that, that will unlock for you?

Well, we submitted the AlloSure Heart about October last year. So we're looking forward to get some news, Mike, no?

Yes. I think the latest that it would -- that would come would be 12 months after the close of the public comment period, which was back in October. So yes, the latest, October 2020. We do hear from MolDx, who is -- this is going through their process that they're a little bit resource-constrained and under pressure a little bit because of COVID. So that's really causing the delay, but we expect it sometime this year. So probably late Q3, we'll get some news on reimbursement for AlloSure Heart.

Okay. And any thoughts on the size of the opportunity?

Well, we've always said, AlloSure Heart, if it's used in combination with AlloMap, the minimum that we would expect to get paid actually would just be the AlloMap rate. So it could be that we can use both tests together in combination. If so, we see that, that would speed up our penetration and the utilization. There is a potential upside, and that upside is that if the product is used in combination with AlloMap, there's additional reimbursement. And that could be up to 2,840 because that's really now the established rate for cell-free DNA in transplantation. So somewhere between that range we expect. So ultimately, it could double the size of the market in heart. But we just have to see how that reimbursement comes out when we get that notification from MolDx.

Okay. And maybe just on AlloMap Heart. It's still a franchise that keeps growing for you, even though it's 7-plus years old. Just curious, what do you see as the key driver of that growth? And is this something that you see sustainable when you look forward?

Well, thank you very much, Veronika. Great question. I think we always -- some of you will recall that we said this is a mid-single-digit grower because of heart transplant volumes are actually not growing significantly despite the tremendous need. There are only about 3,000 heart transplants performed in the U.S. every year. So in that sense, the market opportunity is somewhat defined. But we continue to see stellar growth on the franchise, which I think has to do with 2 things. One is really replacing biopsies through blood-based information. And the second is we see AlloSure and AlloMap, this combination that we call heart care is driving the market tremendously. So already 70% of our AlloMaps are paired with an AlloSure based on our short trial and our compassionate use offerings that we have in the marketplace. So in that sense, we were really successfully reinvigorating or even growing the franchise on the heart side.

Okay. That's very helpful. And I want to make sure that we spend a lot of time talking about AlloCell because that's the big opportunity. But before we do, just maybe very quickly on RemoTraC, and Peter, you touched upon this already. But do you think this is something that has longevity beyond COVID as you think about the sort of new world? And then, Mike, from a financial perspective, what does this mean for the business? What's the profitability? Is this kind of dilutive, accretive to the bottom line?

Veronika, great question on RemoTraC. I think this is a good question about telehealth there to stay. And I would say the 1 answer that I would have on telehealth is really what is going to be the reimbursement levels for telehealth in the future. I could see a world where we'll go back to patients going to transplant centers in case telehealth will not continuously be reimbursed and attractive for centers. If the reimbursement continues to be at the level currently, I see telehealth here to stay because patients simply love it. I was talking earlier about patients needing 3 and 4 hours driving into a transplant center. Here in the Bay Area, if you need to cross a bridge, or in New York, if you need to go into Downtown Manhattan, if you can prevent that from happening, you basically get back of transplant patients almost a day of going back and forth. And patients just simply love it, especially when they're doing well, to just have a quick checkup. So I think if telehealth is here to stay and will be adopted widely, definitely, RemoTraC is here to stay as well. But that will depend truly on preference on patients and clinicians going forward.

Yes, maybe I'll just hit on the financial implications. We will see a short-term impact on gross margins. We've said that for a RemoTraC blood draw is probably $100 more than our usual cost. And with an average reimbursement across AlloMap and AlloSure of about $2,100. And if this was 50% of the volume, it would be a 2% to 3% impact on gross margins. But again, we see this as being a positive driver for the business. So I think we're happy to take that short-term impact. And over the long term, if we can be improving the reimbursement from private payers on AlloSure, then I think we can get back to the gross margins that we're planning for in the long term.

And this is probably kind of a tough thing for you guys to influence given your relative size. But how many conversations do you have with payers around telehealth reimbursement? Is this something where you and the industry can drive a little bit better pricing and reimbursement going forward? Or you think there are bigger forces that will determine that?

I think, Veronika, we know our place in the industry. But I think in the patient -- amplifying patients' preference will be incredibly important. We see tremendous patient need for having more monitoring remotely. And our population is really focused on Medicare because many of these kidney transplant patients are actually Medicare reimbursed. So we have strong relationships with CMS, and we continue to play a role in caring for transplant patients, and we'll continue to make sure that this voice is heard because the preference of transplant patients clearly is to have very strong remote monitoring capabilities going forward.

Okay. Well, let's talk about AlloCell because this is the -- something that if I look at sort of the TAMs that you've put on the slide, obviously, it increases the opportunity for your business pretty substantially. Help us understand a little bit sort of your vision for the business model here? What drives that $5.5 billion TAM that you've put out there? Where are those revenues coming from, testing versus services? How are you thinking about it in deriving it?

Well, thank you very much, Veronika. I think this is a -- I feel like equal when I talked about the $2 billion post-transplant kidney opportunity now about cellular therapies. Our technology for allogeneic cell transplantation is uniquely capable of monitoring the engraftment, also the peak volume of cells after treatment as well as the persistence, which seems to be very important, what is the longevity of these transplanted cells in a recipient. And our -- we have the lowest level of detection in solid organ transplantation monitoring with our AlloSure technology. In a way, that's the same thing that you're doing. You're measuring cells that are non-own cells in the bloodstream of the recipient. So in terms of the -- how do we come up with $5.5 billion, if you take the numbers on blood cancers, and then you take 10% of the numbers of solid organ -- solid tumor cancers, and then you calculate a surveillance schedule that's similar to the AlloSure schedule, about 7 monitoring visits after treatment and multiply that with 1.5 treatments and multiply that with the AlloSure reimbursement rate that we have established as a cell-free DNA test in transplantation, you come out with a $5.5 billion TAM. Now this is a TAM to be built over the years, but CareDx has been doing exactly that in post-transplant care. And so we see a lot of analogues that if people look at cellular therapy as a transplantation procedure, you can see that we are bringing this in tremendous franchise and backbone that we have in the leading teaching medical hospitals in the United States to bear and are destined to capture that opportunity on the cellular therapy side.

And I presume this is a slightly different story in that CAR-T is obviously only an emerging therapy from a treatment perspective. So working with pharmaceutical companies is incredibly important. How much traction are you getting there? Can you share who you're working with and sort of what their response has been to this concept, to this platform?

Incredibly exciting. There are about 20, 30 companies out there that have what we think are meaningful allogeneic cell transplant efforts ongoing or trials ongoing. And when we see how they are measuring their cells based on ancient technology or pretty archaic technology actually on qPCR or on FACS, I think we can have a tremendous, tremendous impact there. Some variabilities that they might see in patients might be determined more by the variability of the diagnostic testing solutions that they're applying versus actually true biological variation. So I think this will be very exciting. And we actually announced a few weeks back the first meaningful partnership. And since then, the ball is rolling. You're probably right in the sense that this will take some time. I mean, cellular therapy, it's only in its early innings. Allogeneic cell therapies are only starting to emerge in Phase III trials. So in terms of number of patients, we will need to be a little bit patient. But in terms of pharma collaborations, you'll hear a lot of news from CareDx in the next year. I'm pretty sure on that.

Okay. And what -- when you pitch this to the pharma companies, what's their sort of -- what do they find most attractive about it, is kind of what's the pitch? And then when you have a conversation about the value proposition, any criticism or feedback that they've given you on the solution?

No, absolutely. I think the first one that they love is the robustness and the industrial approach of CareDx, which is reproducibility. I mean many of these assays, and especially on the PCR front, it's very different to do that in a research lab versus be able to provide that in all teaching hospitals pretty much globally as a CareDx solution and have turnaround times, which is also very important on our surveillance tools turnaround time, which they have not heard of. We can ship samples from everywhere in the United States into our central lab and then provide results out there relatively quickly. And so robustness and then the service model, which leads me to maybe the hesitation is, why can't I just do that in my lab? I've used in my Phase I and my Phase II a certain methodology, and I'd like to ramp that up. And many pharma companies actually do not appreciate the need for having this co-development of having a solution that's robust. We have seen that again and again on the -- on matching diagnostics to therapeutics. But you've seen me shying away from this companion diagnostics term because we really see CareDx providing a platform for multiple allogeneic cell therapies and do not want to be niched with an individual therapy. So we see this as a platform technology being applied for allogeneic cell transplantation.

Okay. And we're almost out of time, but I've gotten a couple of investor questions. So let's see if we can get them out of the way. The first one is, obviously, there's been quite a lot of talk from the current administration about increasing transplant volumes for kidney patients in particular. Sort of how realistic do you think that is, and when you think about your TAM, is that something that's contemplated within your midterm forecast?

Great question. Pre-COVID, we were talking about doubling the kidney transplant volume within 5 years. Right now, to be all honest, Veronika, we've been myopically focused on serving the patients right now. I think we'll need to see what the rest of the year brings. What's definitely true is that there are so many patients on the waiting list. And there are about 100,000 patients on the kidney transplant waiting list. Only 20 of those, even in a great year, will be transplanted. So the need is there. The question is can we significantly increase organ procurement. And that's actually something which we see a lot of positive signals out of the organ procurement organization, the OPOs around the country where there are more than 51 of those, and benchmarking them and bringing them to a performance level that's comparable, I think will be very exciting and will drive growth. We also have seen CMS reducing their need and focus for the 1-year graft survival, which probably is a smart thing also with COVID-19. So people will focus on longer-term outcomes, which eventually will also have a result in increased organs going down. Our TAM assumes the current levels of 22,000 kidney transplants a year. So to answer your question, I think that's all upside for us going forward.

Okay. Fantastic. And very quickly, an update on OKRA study. Where are you with that, if we can get that out in 30 seconds?

30 seconds, again, we're very focused on caring for existing patients, as other pharma companies and diagnostic companies' clinical trials have been -- by many transplant centers have been stopped in the immediate era of COVID-19, but we see many research associates now coming back on transplant centers. And we're looking forward in the next few weeks to ramp up again. But that has taken a little bit in the hit on the second quarter, but we'll be -- we're destined to ramp that up in the third and fourth quarter as we see many research associates coming back.

Fantastic. Well, with that, we are at the top of the hour and out of time. But Peter, Mike, thank you so much for joining us. All the best. And we look forward to hopefully seeing you in person soon rather than later.

Absolutely. Love to have you here. Thank you so much, Veronika. Really appreciate the opportunity. Thank you. Bye-bye.

Thank you.

Thank you, guys. Bye-bye.