Good day and thank you for joining us. Welcome to the Biodesix Q2 2024 Earnings Conference Call. I will now turn it over to Chris Brinzey from Investor Relations. Please go ahead, Chris.

Thank you, Operator, and good afternoon, everyone. Today Biodesix released results from the second quarter of 2024. Leading the call today will be Scott Hutton, Chief Executive Officer. You will be joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the investor relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. With that, I'd now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris, and thank you all for joining us today. I'm thrilled to report that it's been another strong quarter marked by exceptional performance in all areas of the business. For 2024 our team and organization remain committed to delivering on three key goals, which include driving increased revenue through the adoption of our lung diagnostic test and our biopharma services, implementing operational efficiencies to continue to deliver strong gross margins, and maintaining a strict, cost-disciplined approach on our path to profitability. In the second quarter, we excelled in all three key goals, delivering 51% growth in revenue year over year, 78.4% gross margins, and a 38% improvement in adjusted EBITDA year over year. Based on this continued strong performance, we're raising our 2024 total revenue guidance to $70 million to $72 million, up from the previously provided guidance of $65 million to 68 million. This change in guidance reflects our continued confidence in the business, and we believe the first half results have set a strong trajectory for continued success in 2024 and beyond. Our lung-focused commercial team is making considerable progress selling our five Medicare-covered tests to help improve early lung cancer diagnosis and treatment decisions. They delivered 42% growth in test volumes over the second quarter of last year. In order to address this massive, multi-billion dollar market opportunity, we're continuing to grow and expand the lung-focused commercial team. In the second quarter, we had an average of approximately 61 fully trained sales representatives, as compared to an average of 55 in the first quarter of 2024. As a reminder, it takes about three months before a Biodesix rep is fully trained, and by that point, they're paying for themselves, consistent with the plans we've shared before. We will expect to add approximately 6 to 8 reps per quarter to better reach more physicians. In addition to the growth in test volumes, we've added a number of new reimbursement coverage policies for Nodify XL2 over the last several months. The coverages include policies from various Blue Cross Blue Shield plans, including Highmark, HMSA in Hawaii, Kansas City, Louisiana, North Carolina, South Carolina, Rhode Island, Tennessee, and Vermont, plus private plans such as Geisinger, Health Partners, Medica and others. We're pleased with the steady advancement in reimbursement and remain focused on adding more private payer coverage policies for our test. In addition, we've also added more contracts, which in combination with these coverage policies, have led to improvements in the average revenue received per test result delivered. Combining the improvements in average revenue received with the growth in test volumes resulted in 44% growth in revenue from lung diagnostic tests. We continue to generate clinical data to help drive awareness and adoption of our test. In May, we presented new data at the 2024 American Thoracic Society International Conference in San Diego, highlighting the ability of our Nodify XL2 test to identify benign nodules in patients with emphysema. Emphysema is a common comorbid pulmonary condition in patients with lung nodules. This presentation demonstrates how the Nodify XL2 test can successfully assist with ruling out lung cancer, regardless of the patient's emphysema status. Enrollment in Altitude, our prospective randomized trial evaluating the clinical utility and performance of our Nodify test continues at a number of major academic institutions. This study is being overseen by an independent data monitoring committee that will be determining potential interim analysis and will provide more updates in the coming quarters following their meetings. We also published new data in the Annals of Oncology that highlights the role of our GeneStrat testing to monitor the efficacy of new therapeutic regimens. Our tests utilizing the Bio-Rad ddPCR technology to analyze circulating tumor DNA have been included in a variety of studies and publications from Biodesix, biopharmaceutical partners, and consortia partners. Data has been presented showcasing the utility of the targeted test for detecting treatment resistance, detecting cancer recurrence even before imaging, and monitoring treatment response, such as the data included in this peer-reviewed publication. Speaking of our biopharma services business, we continue to see the momentum that began in the second half of last year, growing 228% over the second quarter of 2023. This service combines our multi-omic data with our artificial intelligence platform to uncover novel, unbiased insights that our customers use to personalize patient care and help improve disease detection, evaluation, and treatment. We're achieving growth through additional projects from existing customers as well as new contracts with new customers from a steady number of incoming RFPs and opportunities. Moving to operations, our team continues to deliver steady and consistent gross margins of 78.4%, which represents the fourth quarter in a row in the upper 70s. Not only have we been effective in providing our tests with industry-leading turnaround times, we've also been efficient in delivering those results. With our commitment to an effective, efficient, and cost-disciplined approach, we've built a commercial and operational platform that will help facilitate long-term, consistent, sustainable, and profitable growth. I believe everyone is beginning to appreciate the operating leverage that exists within the business and our efforts to demonstrate the team's significant progress and outstanding execution on our path to profitability. We not only have an incredible opportunity but a responsibility to transform the standard of care in lung cancer. Lung cancer is still the deadliest of all cancers, as it claims more lives annually in the United States than the next three deadliest cancers combined: breast, prostate, and colon cancer. Time is of the essence when it comes to diagnosing and treating these patients. By discovering, developing, and commercializing tests with demonstrated clinical utility and best-in-class turnaround times, we believe that our diagnostic tests play a critical role in these efforts to treat the right patients quickly and effectively. Finally, in addition to providing product and service excellence, we believe we're building something unique and special here at Biodesix. In June, we were named to Inc. Magazine's 2024 Best Workplaces. This prestigious award is only granted to approximately 500 U.S. companies each year from across all industry sectors, both public and private firms of all sizes. This is one of our highest honors as it validates and affirms our entire organization's commitment to a culture of excellence. It is a reflection of our amazing team and their commitment to making a difference in patients' lives. And I want to thank everyone for their hard work and dedication. With that, let me turn it over to Robin to review the second quarter 2024 financial performance. Robin?

Thanks, Scott. Second quarter total revenue was $17.9 million, a 51% increase over the prior year and a 21% increase over the first quarter of this year. Lung diagnostic revenue in the second quarter was $16.5 million from approximately 13,900 tests as compared to $11.5 million from approximately 9,800 tests for the second quarter of 2023, representing a 44% growth in revenue and a 42% growth in test volumes. In prior earnings calls, we have provided updates on our efforts to resolve certain administrative challenges imposed by a select few Medicare Advantage plans. While we do not have more to report at this time, we continue to be in discussions around a resolution. Any potential revenue resulting from a resolution is not included in our revenue guidance. Biopharma services revenue was $1.4 million in the quarter compared to $400,000 in the second quarter 2023, an increase of 228%. Even with the completion and recognition of significantly more revenue than in prior quarters, our pipeline is robust, and we ended the quarter with approximately $8.1 million contracted, but not yet recognized as revenues. Gross margin percentage in the second quarter 2024 was 78.4%, up 5.7 percentage points versus 72.7% in the prior year quarter, and consistent with 78.6% in the first quarter of 2024. Following a variety of operational improvements over the last year in both our lung diagnostic testing and biopharma services, we have delivered on four straight quarters of gross margins in the upper 70s, and expect that the gross margins will remain steady in the upper 70s going forward. Overall operating expenses, excluding direct costs and expenses, was $22.3 million in the second quarter 2024 compared to $19.6 million for the same period of 2023, a 14% increase. Operating expense for the second quarter 2024 includes $2.7 million in non-cash stock compensation expense, depreciation and amortization, and asset impairment, as compared to $1.9 million during the second quarter 2023. The increase in operating expense versus the prior year quarter is primarily the result of an increase in sales and marketing costs to support lung diagnostic sales growth to enhance product awareness and drive adoption, as well as an increase in depreciation expense related to the leasehold improvements in our new Louisville, Colorado office and laboratory. Net loss for the second quarter 2024 was $10.8 million, an improvement of approximately $2.5 million, or 19%, as compared to a $13.4 million net loss for the second quarter of 2023 and $13.6 million, or a 21% improvement for the first quarter of 2024. It is important to note that the net loss for this quarter included a net $600,000 of one-time other expenses that are not expected to occur going forward but increase the net loss in the quarter. Adjusted EBITDA, which excludes non-cash and other one-time expenses, was a loss of $5.6 million compared to a loss of $9.1 million for the second quarter 2023, a 38% improvement. This is our fifth straight quarter of year-over-year improvement in adjusted EBITDA, which is driven by our increase in revenue, strong gross margins, and our focus on actively managing our operating expenses. We ended the quarter with $42.2 million in unrestricted cash and cash equivalents, compared to $11.5 million at the end of the first quarter, which included an increase of $51.3 million in net proceeds raised in an oversubscribed and upsized underwritten public offering and concurrent private placement, and a decrease of $13.8 million from milestone payments paid in the period for both the scheduled second and scheduled third quarters as a result of the acquisition of Integrated Diagnostics in 2018. Prepayment of the third quarter milestone resulted in cash savings from avoided interest. We are pleased to note that the final integrated diagnostics milestone payment is expected to be made at the end of the third quarter, bringing these milestone payments to a close. Cash flow from operations, excluding the milestone payments which for clarity, are labeled on the statement of cash flows as contingent consideration, also made significant improvements quarter over quarter. In the first quarter of 2024, net cash and cash equivalents used in operating activities were $15.3 million, inclusive of $3.4 million for contingent consideration; therefore, it was $11.9 million of cash used in operations in the first quarter, exclusive of the contingent consideration. For the first half of 2024, net cash and cash equivalents used in operating activities were $33.9 million inclusive of $17.2 million for contingent consideration; therefore, it was $16.7 million exclusive of that amount, or $4.8 million of cash used in operation during the second quarter 2024 exclusive of the contingent consideration payments. The difference of $7.1 million, which is a 60% improvement in cash used in operations during the second quarter '24 versus the first quarter of '24, is again the result of our increase in revenue, strong gross margins, and focus on actively managing our operating expenses. Finally, turning to 2024 guidance. As Scott mentioned, we are increasing the 2024 total revenue guidance to $70 million to $72 million, up from $65 million to $68 million, reflecting the strength of the first half and our confidence in the second half of 2024 and beyond. Now let me turn it back to Scott.

Thanks, Robin. Overall, we are exceptionally pleased with the progress in the quarter and through the first half of the year. We are increasing our 2024 revenue guidance, and we continue to make substantial progress on our path to profitability. We are transforming the standard of care, and our organization is motivated every day knowing that we're making a significant impact on healthcare professionals, their patients, and those patients' families. I believe our future is brighter now than at any point in our company history. With that, I'll turn the call over to the operator for questions.

Our first question will come from Andrew Brackmann of William Blair.

Maybe just to start here, you're obviously seeing some nice momentum in the business, especially on the volume side this quarter. Anything you can share in terms of where you're seeing that strength, where you're winning, be that in certain accounts, different institutions, group practices, or even geographies. Thanks.

Yes. Great question, Andrew. We're seeing consistent growth across all opportunities and sectors from a product perspective. As we've stated in the past, Nodify, our nodule management test, is driving and fueling that growth. But as we continue to expand the sales force, starting the quarter at 60 and continuing to expand by 6 to 8 each quarter, we know we're reaching physicians that we've never reached. So in those territories, it's easy to see growth come from new accounts and new ordering physicians. In the more mature accounts, we're seeing broader adoption within a practice. And then we're also seeing growth in total test volume. So pretty balanced, pretty equal across the board, nothing glaring in terms of a deficiency or an opportunity for improvement at this time.

Perfect. And then maybe just on pricing. Thanks for all the color on sort of the wins this quarter, certainly it looks like you saw some improvement quarter over quarter in the second quarter. Just first, how should we sort of be thinking about continued improvement, just given the wins that you had so far this year? And then secondly, just, can you level set up on where the funnel stands for additional contracts or coverage policies moving forward? Thanks.

In our guide, we are not building in any real improvements in reimbursement and in additional coverage policies, so we tried to take a fairly conservative approach in the guide itself. Obviously, from a business perspective, the team is out working on expanding both coverage and contracts for all of our tests. We've had a lot of good wins, including some recent wins we look forward to sharing with everyone about for XL2 and are anticipating starting to see some momentum here for CDT as well. As a reminder to everybody, Medicare accounts for about 60% of our business. So while each individual private payer coverage policy does not necessarily move the needle a lot, the momentum and number of them coming in together does start to improve it. So we've got a great funnel. There's some real excitement out there. As I've said for many years, one of the hardest things is getting the attention of payers and making sure they understand the problem you're trying to solve. Payers know this problem. They know we're missing cancers, and so we need to diagnose cancers earlier, and they know they're paying for unnecessary invasive procedures on benign nodules, and our nodule management test can help address both of those issues.

Our next question will be coming from Dan Brennan of TD Cowen.

This is Kyle on for Dan. Thanks for taking the questions. I want to start with one, maybe if you could elaborate on the ongoing sales force expansion, what's been the impact thus far upon demand creation and just test volumes? Thank you.

You know, this quarter, as everyone knows, we completed a fundraise intra-quarter. Part of the use of proceeds were continued investment in and expansion of the sales force. So we brought those sales reps on a little bit later this quarter than comparatively what we had done in prior quarters. So one way of really looking at the most recent additions is, yes, we've continued to see them begin paying for themselves at the three-month mark. These new team members really had a limited amount of time to impact the quarter, so we were really excited to see that the team that was already in place prior to those additions went out and continued to excel and grow. What we do know is that we continue to see sales rep productivity in and around the $1 per rep target annualized. So it's always going to be advantageous for us to bring those new team members on earlier in the quarter, giving them an opportunity to contribute as quickly as they can and impact the overall year. That's remained pretty consistent. Kyle, so nothing has changed in the recent months or quarters.

Got it. Thank you. And then trying to go back to the Altitude study, you know, which you mentioned in the prepared remarks. Is this still on track for year-end '24 completion? And what's your level of confidence in the trial working?

Yes, you know, great question. We feel really good about the study design. It's difficult to comment on kind of how it's going since we're blinded from that data. But, you know, we worked with a number of major academic institutions and really prominent pulmonologists, many of whom contributed to the ATS standard for prospective trial design, so we feel confident in the study design. We've had others look at it and confirm that our approach is best in class. From a timing perspective, we stated in prior calls that due to early enrollment delays from the pandemic, that we were a little delayed and we do not expect complete enrollment and closing the study in 2024. It'll probably be late 2025 going into early 2026. But that's one reason that we have highlighted the data safety management board and the role they'll play. They're going to meet here in the next couple of months, and we'll wait to receive feedback from them, and at that time, I'll be able to answer questions about interim analysis, any sort of data that they want to share. But we're really pleased enrollment has continued to pick up, and site engagement is really high.

Our next question will be coming from Thomas Flaten of Lake Street Capital Markets.

With the Louisville facility being complete, are there any significant investments that will be made in that facility? I'm assuming no. But then also flipping to DeSoto, are there any investments there we should be aware of you guys making in the near term?

Great question. No, you've nailed it. As we moved into this facility, really at the beginning of the year, there are no needed expansion investments or anything that needs to occur here in Colorado. We have begun looking at how best we set the Kansas laboratory and team up for long-term sustainable results. And we will be looking at improving their facility, giving them space to grow and expand, but that won't occur this fiscal year. So we'll begin looking at that kind of in the 2025 to 2026 time horizon. Just as a reminder, the Colorado facility is our headquarters; it's 80,000 square feet. The majority of the growth and expansion will occur here. The needs of the team in Kansas really are related to the two Nodify tests and running those, and it's a much smaller footprint. So we feel really good about the real estate options there, and we'll try to be mindful of cost as we enter that project. But it really is about better enabling that team to work effectively and efficiently.

We will provide more details as we get closer.

Got it. Appreciate it. And just to confirm, Scott, so the 6 to 8 adds per quarter on the sales team that has you ending the year at 75. Is that the right number for us to be thinking about?

Yes, Thomas, I think you're thinking about it exactly how we are. The key component, like I said earlier, is, you know, the sooner we can bring them on, the more time they have to contribute. If we bring, you know, let's say we end the year at 75, the truth is, we'll probably have 4 or 5 of them that will begin coming on later in the quarter, and that really just sets us up for success to come out of the gate strong as we enter 2025, but your numbers and the cadence of additions are exactly how we're planning.

And then just one quick final one, kind of following on from an earlier question about where you guys are winning. I was curious if there are mature accounts or pulmonologists, in terms of having been called on a lot that you don't feel are fully penetrated. I don't know if there are such people, but I would be curious if there are, what is their hesitancy to kind of going all in with the Nodify products?

Yes, it's a great question. In any one of those scenarios, it's going to vary. It'll vary by practice. It'll vary by referral patterns and the patient population they see. There's nothing glaring, nothing standing out that limits us. What we've seen is continued or deepened penetration into those accounts. We now have a handful of accounts that have exceeded their 300th order, and we have one that's over 500 Nodify test results. So you can see the longer we're in those accounts, we are seeing broader and continued use and adoption. We've tracked over time what we really see is, once an account gets to kind of that 10 to 20 test ordered, and we can have a consultative review of those test results, we find that reorder rates jump pretty significantly. Once they get beyond that 40 to 50, it's pretty linear as they continue to grow and scale from there. We've not seen anything new, or in recent months or quarters that have changed that. And so we feel really good that we can continue to add the sales reps that we're planning to add, enabling them to get out and really share the value that the Nodify tests offer, and we're excited to do so and continue to provide these strong results.

I'm showing no further questions. I would now like to turn the conference back to Scott for closing remarks.

Thank you, operator. It's an exciting time here at Biodesix. We've worked long and hard to build the best pulmonology-focused commercial team in diagnostics. With first mover status in lung nodule management and an ever-increasing body of robust clinical data, we are building on the momentum we created as we further increase our clinical and payer adoption in this extremely large and underserved population. We've had a great start to the year, and with a strong balance sheet to execute our plan towards profitability, we view 2024 as a pivotal year of execution, and we look forward to updating you on our continued progress and success on upcoming earnings calls. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.