Good day, and thank you for standing by. Welcome to the Biodesix Q2 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Brinzey. Please go ahead.

Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the second quarter of 2025. Leading the call today will be Scott Hutton, Chief Executive Officer. He is 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. I would 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. At Biodesix, our mission is to transform patient care and improve outcomes through personalized diagnostics that are timely, accessible and address immediate clinical needs. We leverage a multimodal approach that includes genomics, proteomics and radiomics, combined with AI to discover, develop and commercialize innovative diagnostic tests for physicians, biopharmaceutical, life sciences and diagnostic companies to help improve patient care. In 2025, we are focused on three main goals: growing our top line revenue, improving operational effectiveness and efficiencies that will result in a positive adjusted EBITDA in the fourth quarter, and advancing our pipeline for future growth and expansion. In the second quarter, we made progress on all three by growing revenue by 12% year-over-year, improving our already strong gross margins by 150 basis points to 80%, and presenting clinical data on multiple pipeline products. Starting with the clinical offering in lung diagnostics, our major focus is on lung nodule management where nodules are either found incidentally when the patient has an image taken for another purpose or during low-dose CT screening for lung cancer. In our recent earnings calls, we've provided detailed information about our plan to expand our commercial sales efforts to better address gaps in care for patients with lung nodules. Throughout last year, a growing number of ordering pulmonologists provided important feedback, stating that ordering the Nodify XL2 and Nodify CDT test within their referral network would help optimize nodule management. If the tests are ordered earlier, those patients who are at higher risk of lung cancer should be referred on to the interventional pulmonologist, while lower-risk patients may remain with the primary care physicians for monitoring. This feedback was instrumental in the formation and implementation of our territory-based sales strategy to engage both pulmonologists and their referral network, including primary care. In the first quarter, we implemented this change and reconfigured our sales team to 49 territories. Each territory is anchored by a pulmonology sales representative with a mix of primary care sales representatives and associate sales representatives providing support in driving adoption in pulmonology and through their referral network. The specific combination of the sales roles in each territory is tailored to the local clinical need. We believe this approach allows us to directly address the nearly 50% of patients with lung nodules currently being managed by primary care physicians outside of pulmonology. In the second quarter, we completed training of our first full class of primary care sales representatives who entered the field in late June. While the first full class has only been in the field for a few weeks, the response from primary care physicians has been encouraging with physicians recognizing the clinical need and the benefits of improved lung nodule risk assessment with Nodify testing. Prior to the initiation of our primary care pilot conducted in the second half of 2024, approximately 4% of Nodify tests were ordered from primary care. As a result of our targeted efforts, that number has increased to approximately 9% in June. We're also working on ways to make it easier for clinicians to order and implement our test in their practices. In fact, one added benefit to our updated sales strategy is the availability of on-site blood draw capabilities within the primary care setting. This has historically been a challenge in pulmonology, where we frequently need to leverage our extensive mobile phlebotomy network to collect blood samples for testing. Once a patient leaves the physician's office, we face the all too common challenge of patient compliance to ensure the blood draw is completed. Completing the blood collection on-site before a patient leaves the facility results in 30% more tests delivered than if the patient leaves and needs to schedule a blood draw at another time. Ordering the test in the primary care setting and collecting the sample on-site helps to address this challenge. In addition, electronic ordering streamlines the process and ease of use for the physicians in their office. Customer retention in those offices that utilize digital ordering is 40% higher than those who do not. Since the Nodify launch, we've expanded our digital test ordering capabilities through our Biodesix Physician Portal and a number of early EMR integrations. Through these efforts, our digital ordering has increased by 63% over last year. In the second quarter, we had an average of 74 sales representatives in the field who delivered 15,100 total lung diagnostic tests and just under $1 million in annualized revenue per sales rep. Looking forward, we expect to have an average of 83 to 87 reps in the field in the third quarter and 93 to 97 reps in the fourth quarter, allowing us to drive patient access to cutting-edge diagnostic tests regardless of where they're being managed. In addition to our commercial efforts, we continue to build the book of clinical evidence supporting the use of our Nodify test. In the second quarter, health economic and outcomes research data supporting our test were presented at ISPOR 2025 and an independent study from a clinical user of the test was presented at ATS 2025. We are also continuing to make progress with our CLARIFY study, which is a retrospective chart review evaluating the use of Nodify testing in real-world clinical practice. This trial is expecting to enroll approximately 4,000 patients. Since the launch of the study in late October 2024, we've already accrued over 1,100 patients and anticipate releasing interim data from the study in the second half of this year. Finally, we are pleased to provide an update on our prospective randomized clinical study, ALTITUDE. The Data and Safety Monitoring Board met and determined that the study has enrolled a sufficient number of patients to reach statistical power and recommended that patient enrollment close. Patient enrollment closed in late July, and now the investigators continue the mandated 1-year patient follow-up to track outcomes. As the company is blinded to the data while the study is ongoing, we do not have any additional information on potential results, but are pleased to see that a sufficient number of patients have been enrolled as we move to the next phase of follow-up. We will provide additional information on the study as it becomes available. Moving to our pipeline. We had multiple presentations on our products in development. Our current pipeline consists of our combination proteomic and genomic MRD test, expanded indications for VeriStrat into several new tumor types with immunotherapy selection, and digital diagnostics. Multiple presentations on our MRD test were presented in April and May, including at AACR 2025. Our unique MRD test combines the proteomic information from our risk of recurrence test that can give insights into a patient's immune status, along with tumor-informed genomics that leverage the high sensitivity of Droplet Digital PCR for disease monitoring. At ASCO, new data was presented from the prospective registry study INSIGHT, demonstrating the potential of the VeriStrat test in helping to guide first-line immunotherapy treatment strategies in patients with non-small cell lung cancer and PD-L1 of greater than 50%. At ASMS, we shared data on the use of the VeriStrat test in identifying hormone treatment responses in men with metastatic castration-resistant prostate cancer. Finally, we will also share more data on the prognostic significance of VeriStrat in multiple MSI-high solid tumors in patients eligible for treatment with KEYTRUDA. These data will be presented by our collaborators at the upcoming ESMO meeting in the fall. Shifting to Development Services. We continue to see strong interest in our Development Services offering that leverages our multiomic approach and R&D expertise to help deliver insights that our biopharma, life science tools and diagnostic partners use to personalize patient care and help improve disease detection and treatment decisions across various disease types. In the second quarter, we delivered $2.1 million in revenue, growing 53% year-over-year. The funnel has also continued to grow, and we exited the quarter with $12.5 million under contract, representing a 54% increase over last year at this time and an all-time high. In early July, Thermo Fisher announced their new NGS assay received FDA approval as a companion diagnostic. The announcement recognized Biodesix as a key collaborator in the validation of the test. This partnership and approval are key examples of the strength of the Biodesix Development Services offering, including test discovery and development, clinical trial testing and regulatory support for companion diagnostics. We look forward to providing further updates on additional progress with Thermo Fisher and this initiative. Overall, we are very encouraged by the continued strong year-over-year growth in this business and believe there is significant potential for upside. With that, let me turn it over to Robin to review our financial performance for the quarter. Robin?

Thanks, Scott, and good afternoon, everyone. Second quarter total revenue was $20.0 million, a 12% increase over the prior year. Lung diagnostic testing revenue in the second quarter of 2025 was $17.9 million from approximately 15,100 tests as compared to $16.5 million from approximately 13,900 tests for the second quarter of 2024, representing 9% growth in test volumes and 8% growth in revenue. Development Services revenue was $2.1 million in the quarter, representing 53% year-over-year growth. We ended the second quarter with $12.5 million under contract. And as Scott previously mentioned, this represents an all-time high. Our gross margin percentage in the second quarter of 2025 was 80%, up 150 basis points from 78.4% in the second quarter of '24. Despite increases in supply costs and existing macroeconomic uncertainty, we expect gross margins to remain in the upper 70s through the rest of the year. Overall operating expense, excluding direct costs and expenses, was $25.7 million in the second quarter, which was a 15% increase over the second quarter of 2024. Total SG&A was $22.4 million versus $19.7 million, a 14% increase, driven primarily by the addition of 13 more active sales representatives or 21% growth in the number of reps in the field and the planned expansion Scott has talked about in detail. As Scott noted before, we are continuing to scale the sales team and expect 83 to 87 active sales reps in the field in the third quarter and 93 to 97 in the field in the fourth quarter. R&D expense was $3.3 million versus $2.6 million or a $700,000 increase due to the investment in clinical studies to help advance adoption of our lung diagnostic tests and advancement of our pipeline. Net loss for the second quarter of 2025 was $11.5 million, an increase of 6% year-over-year. Adjusted EBITDA, which excludes noncash and other one-time items, was a loss of $7.2 million, which was an increase of 29% year-over-year. We ended the quarter with $20.7 million in unrestricted cash and cash equivalents. Cash in the second quarter included the drawdown on the $10 million Tranche C loan from Perceptive Advisors. Cash used from operations in the second quarter was $6.6 million, a 23% improvement over the $8.6 million in the first quarter of '25. We are maintaining our guidance of $80 million to $85 million of revenue for the year. Because of our strong gross margins and the planned and actual expansion of the sales team and the rep productivity achieved to date, we expect to achieve adjusted EBITDA positivity in the fourth quarter. Now I'll turn it back to Scott for some closing thoughts before the Q&A. Scott?

Thank you, Robin. To summarize our achievements, we grew the size of the sales team to an average of 74 sales representatives in the field during the quarter, an increase of 13 reps, up 21%. We increased primary care ordering of lung diagnostic tests over 100% during the quarter versus levels seen prior to the pilot program in 2024. We achieved an all-time high in Development Services business dollars under contract of $12.5 million, up 54%. We announced new clinical and economic data supporting the Nodify lung test at the ISPOR 2025 Annual Meeting and the ATS 2025 International Conference. We reached patient enrollment requirements in July 2025 for ALTITUDE with patient follow-up expected to continue for approximately 1 more year. We presented data on three pipeline initiatives, including the combination genomic and proteomic MRD test at the AACR Annual Meeting, the use of VeriStrat in first-line immunotherapy treatment selection at the ASCO Annual Meeting and VeriStrat in hormone-resistant cancer at ASMS. And we were honored to be recognized as a top workplace for the second consecutive year, a strong reflection of our exceptional team and thriving culture. Before moving on to questions, I want to restate that we have the best lung-focused team in diagnostics and continue to make significant progress in building a market in an area that has not historically used diagnostics in the way that other medical or oncology specialties have. With first-mover advantage in lung nodule management and an ever-increasing body of robust clinical and health economic data, we are generating the momentum to drive greater clinical and payer adoption as we move through 2025 and beyond. With all that's happening, it's a very exciting time here at Biodesix. We look forward to sharing more with you in the coming quarters. Let's now move to questions. Operator, let's start the Q&A session.

And our first question comes from Andrew Brackmann of William Blair.

Scott, you gave a lot of commentary on the primary care opportunity and what you're seeing so far. Can you maybe just unpack that a little bit more for us? Perhaps why are you more confident now that this is the right strategy versus maybe the pilot? And I guess related to that, anything with respect to trends that you're seeing now that may be different than the pilot?

Thank you, Andrew. Those are great questions. I don't believe there's anything significantly different; rather, as we gain more experience, it's reaffirming what we learned during the pilot. Our growing confidence stems from having broader and deeper experiences that remain consistent. We previously understood that nearly 50% of patients are stuck in primary care, which is a major issue. What we're discovering now, with the support of our pulmonology partners, is that we are effectively addressing this problem. We believe this will enhance our market opportunity and, perhaps more importantly, our access to it. We will keep you updated on our progress. As mentioned, we recently had our first class exit, and the team is now in the field. We are continually investing and expanding our sales force. We will provide additional updates and feedback. More pulmonologists are supporting our strategy, and many existing and ordering pulmonologists want to connect with their primary care physicians because they recognize the value. This is precisely why we conduct pilots— they offer valuable insights and boost our confidence in making the right decisions. Now, we are back in the field demonstrating that it was the right decision, and we will continue to showcase these successes.

That's great color. And then with respect to the commentary on electronic ordering, is there anything maybe you can share with respect to the utilization uptick you've seen in those accounts that have begun ordering electronically? And related to that, how do you think about this as a potential way to maybe even open up new customer doors?

Yes. Great question, Andrew. And I think it may surprise most but the majority of healthcare practices and hospitals still prefer to utilize fax as a means by which they order or communicate with diagnostic companies and others. And so for us, that is not high tech. It's not fast. It's not the most accurate means by which we can communicate. And so whether it's full EMR integration or something like our Biodesix Physician Portal, there are faster means by which we can communicate. And so for us, it's really been around utilization of our portal and EMR integration, kind of the combination of the two. When individuals use our portal, compliance with the test order improves significantly. And so a way to think about that is when they go to fill out the order request form, if you're utilizing a portal, you can't progress until you've filled in all of the sections of the form. If you submit a fax, there could be spots that are left empty. So that would require one of our customer care representatives to get on the phone, call a practice and ask for that information. Just in hearing that explanation and example, you can see that, that's going to provide a delay. And so knowing that lung cancer is the deadliest of all cancers and time matters, we really are focused on being not only as effective as possible, but really how efficient can we be. So when somebody utilizes a digital ordering platform, whether it's EMR or portal, because of that, we see less tests canceled, right? We see less tests that are submitted without all of the appropriate clinical factors. They're just going to enable that, that patient not only stays in the system, but they get the results they need. Is that helpful?

Very helpful.

And our next question comes from Bill Bonello of Craig-Hallum.

What a nice turn from last quarter. A couple of questions. Robin, can you help us sort of bridge to EBITDA positive in Q4? I mean that's a really substantial move from this quarter. And so just trying to understand how much of it is just leverage of revenue growth? Is there cost cutting involved? How do we think about that?

Yes, absolutely. So it is primarily driven by revenue growth. So last quarter, we talked about the cadence of hiring and how last quarter, we were not where we wanted to be and that we needed to shift to adding the 10 reps per quarter, which we saw this quarter and are well on track for third and fourth quarter. That really catches us up to our original plan of getting to about 95 reps in the field in the fourth quarter. So between that and the normal sort of uptick we typically see in our services revenue in the fourth quarter, that's the biggest driver of bridging from where we were in the second quarter to where we expect to be in the fourth.

Okay. That's helpful. And so not necessarily any specific initiatives around operating expenses or anything like that, just leverage.

Yes. No, we have run very lean for a very long time, and we continue to do so. We've made a lot of operating improvements, and you saw an uptick in our gross margin again this quarter for which we're very proud, and we're continuing to focus on those. So the focus on operating expense remains cost containment, running lean, being efficient and trying to find more operational efficiencies, not just in COGS, but also throughout the rest of the business. But our plan does not include any major cost-cutting measures in the third or fourth quarter.

Sure. Okay. That's helpful. And when we think about the acceleration, the revenue growth that's going to happen that's implied in your guidance in the back half of the year, should we think of that as primarily volume driven and because you're adding the additional reps? Or is there anything on the ASP side?

Exactly. It's rep driven and volume driven. We've seen nice stability in our ASPs. We're not forecasting any major changes in ASP at this time. So yes, it's rep and volume driven.

Okay. And then one last question, if I could, which is again, when you're thinking about that ramp, how are you thinking about the Development Services? Is Q2 sort of steady from there? Was it outlier high? Does it grow from there? How are you thinking about that?

Well, we typically see a nice uptick in the fourth quarter just because of the cadence of how pharmaceutical companies work and their budgets work. The fourth quarter tends to be our strongest quarter of the year. So we would anticipate an uptick in fourth quarter over the second quarter.

And our next question comes from Thomas Flaten of Lake Street Capital Markets.

Scott, just reflecting back on some of the numbers you laid out in your prepared comments, and I realize I'm splitting hairs here, but you talked about greater than 100% growth in the primary care-driven orders. Do you have a growth number for the pulmonology? What I'm trying to figure out ultimately is, as you increase the emphasis on primary care, what happens to the growth from the pulmonology community? That's where I'm trying to go with this question.

Yes, it's a great question, Thomas. One of the things that we've stated is in some pulmonology practices, we won't see growth, right, because they're moving ordering out into their referral networks. Now we will see growth collectively as an organization as we bring new ordering pulmonologists on. Some of those pulmonologists that have their referral networks ordering, they're still ordering, but it's less than what they were, say, a year ago. So those numbers, we keep track of them. We monitor them as closely as we can. And in the field, our team structure out there is focused on ensuring that no patients "slip through the cracks." So that ultimately, whatever a pulmonologist was ordering in the past, now that we're in his or her referral network, we should see an increase in ordering because we've gone further upstream. Is that helpful, Thomas?

Got it. Yes, that's very helpful. Regarding the sales team, I believe you mentioned in the last call that your goal was to have 50 pulmonology representatives in 50 territories and to supplement them with junior personnel, including those targeting primary care. Can you provide an update on the current distribution of these new representatives?

Yes. No, you're thinking about it exactly right. So 49 territories, we stated we'll have 50 by year-end. Every territory will have a pulmonology sales consultant. That still is the primary focus here. The associate sales consultants and the general practitioner sales consultants, those are going to be a blend. They're not going to be equal in every territory. We're going to allow what that referral network looks like and those pulmonologists supporting us what guidance they give us. We stated we had our first class that just left. I can share now. We've got less than 10 general practice-focused sales consultants out there today. That will continue to grow. We'll give updates later in the year as to what that mix looks like. But right now, the majority of the focus is on getting those primary care physician support sales reps out there as quick as we can.

And our next question comes from Kyle Mikson of Canaccord Genuity.

This is Alex Vukasin on the line for Kyle Mikson. Congrats on the quarter. One, another question on primary care. So the ordering from primary care increased about 100% over the pilot program in 2024 that you're running. And as of right now, I guess, as of June, about 9% of test orders are coming from PCPs. Just curious, where do you think the volume mix could ultimately level out to over time in terms of volume from PCPs and pulmonology?

Alex, I appreciate the question. It's difficult for us to forecast right now, and we wouldn't want to be presumptuous. Part of the reason we're doing this is to reach that untapped potential in the marketplace. Every territory is going to kind of convert to that differently or at a different cadence. And just as a reminder, we're not out knocking on doors for primary care physicians. We're following the lead of our pulmonology partners who are helping introduce us back into their referral networks. That makes this much more doable. Instead of looking at a 250,000-plus primary care physician population, we're utilizing claims data from Definitive Health, where we know that 80% of those patients really are stuck with about 14,000 to 15,000 primary care practices. So we've mapped it out pretty closely, but we want the support of our pulmonology partners in that pulmonology community. So we don't really have an ideal goal. I think the way we're really looking at success longer term is we want to continue to become the predominant player here that can provide solutions to pulmonologists across the board. The goal for us is to get to more patients with incidentally found nodules so that we can provide value as soon as possible, hopefully positively impacting their long-term outcome.

Got it. And just one more for me. So we've been talking about the potential impact of HEDIS quality measures for some time now. Is the expectation that these could potentially hit in 2025? And once these are finalized and released, do you believe that they could have an immediate meaningful impact on test volume?

Yes, Alex, great question. I'm glad you brought it up. HEDIS just provided an update, I believe it was the end of June, maybe the beginning part of July. Unfortunately, they stated that they're going to put it on hold for this year. And the statement really stated that it's too difficult of a challenge and too complex for them. Specifically, they stated they had concerns about the technical readiness of health plans to adequately capture and report smoking history, the risk of potential harm to patients due to inappropriate or over-screening and the absence of shared decision-making within the systems. From our perspective, we're extremely disappointed by this, especially from a patient perspective. But it reflects some of the challenges that we've stated over the last five years, and we've heard from many, many physicians that it is very difficult to implement screening programs within this lung cancer population. The good news for us is our tests work in both lung cancer screening and incidentally found nodules. And so this will be a win for us when it happens because it will increase the number of patients that are eligible for Nodify testing. But without that, it still does not impact our forecast in 2025 or 2026. So we'll continue to work with others to ensure that the decision-makers within HEDIS consider this because we all know that the only way we're going to make an impact with the deadliest cancer is to get to these patients sooner, and screening is one of the main ways by which we'll be able to do so.

Our next question comes from William Ruby of TD Cowen.

This is William on for Dan. I guess my first question would be, what is your view on your capital needs over the next 1.5 years? Do you still think you have enough room to get to breakeven with some cushion? Just how are you thinking about that? I guess that will be my first question.

Thanks, William. Appreciate it. Robin, do you want to answer that?

Yes, absolutely. William, thanks for joining today. We are absolutely focused on getting to not just adjusted EBITDA breakeven, but also cash flow breakeven. And we think with our existing plans and our growth that we can get there, and we can get to cash flow positivity. And we're doing everything we can to both grow those revenues and keep our expenses as tight as possible to achieve those goals.

Got it. Got it. And then kind of going over to the primary care reps. How confident do you feel that these new reps will be able to maintain $1 million per rep productivity after they ramp? If so, what gives you the confidence? And do you maybe see some upside to that $1 million number given you're expanding in this new market?

Yes. Great question, William. We appreciate that. What gives us confidence is we saw it in the pilot. And so the pilot really demonstrated that they could ramp similarly to what we've seen with our pulmonology sales consultants, and they were paying for themselves in a similar timeframe. Now it's early, but we've seen that with the most recent hires also. They're on a very similar trajectory and path. So it's really not about speculating. It's allowing performance to demonstrate that we can do that. And then on your other question, there is potential to unlock kind of a higher sales rep productivity. That's our average. We do see some reps in some territories that perform significantly higher than that, and that gives us promise. And so we know that there's a lot of opportunity for upside. And we continually focus on providing a lot of different values to these physicians, most importantly, our test, right? They provide significant clinical insights and value to them, but also the support that we provide. So we'll provide additional success stories as we move forward, specifically to your question around the primary care physicians, but we feel confident that they can continue to contribute at that rate. But I think you bring up a good question, which is there might be some different value adds we can provide in primary care that allows us to grow and scale faster, and we're excited to explore that.

I show no further questions at this time. I'd like to turn it back to Scott Hutton for closing remarks.

Thank you, operator. In closing, I want to express my gratitude to all the remarkable members of the Biodesix team who have shown unwavering belief in and dedication to our mission, vision and culture. Our collective commitment and daily contributions are centered around making a positive impact in the lives of patients through their healthcare providers who are our customers. I'm truly thankful for your efforts. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.