All right. Good morning, everybody. For those of you who don't know me, my name is Andrew Brackmann, and I'm the Diagnostics Analyst here at William Blair. Today, we are very pleased to have the team from Biodesix joining us, CEO Scott Hutton and CFO Robin Cowie. Before we begin, just two quick announcements. The breakout for this session will be in Burnham A, and for a full list of research disclosures, please see williamblair.com. With that, I'll turn it over to Scott. Thanks, Scott.
Thank you, Andrew. As always, it's great to be here. Really appreciate the William Blair team extending the opportunity. For those who haven't met Biodesix before, we're a blood-based diagnostic company focused on lung cancer. We have five on-market test. Five on-market test, all with Medicare coverage and private payer coverage. In our most recent quarterly earnings call, well, we were really proud to share that we continue our strong growth with our seventh consecutive quarter of greater than 50% growth, industry-leading gross margins at 79%. And about a year ago, we started sharing our Adjusted EBITDA, really trying to show and demonstrate or at least highlight the improvements that we're making, the cost sensitive approach we're taking, and that we're making progress on that path to profitability.
You can see the 48% improvement over prior year, same quarter. Industry-leading turnaround times. We pride ourselves that, that no physician will wait on our test results, and that when a patient comes back in for a consult, they will have our test results in hand to help guide and inform treatment decisions. Robin Cowie and I are here today, so hopefully we'll see some of you in the breakout room. We have no competition in our space, not because there's not great need and interest. We just have a first-mover advantage. There's 5 million patients, on an annual basis that are eligible, for nodule risk assessment testing. And so for us, this really is an execution play.
In our most recent fundraise, which was a $55 million fundraise, that occurred 2 months ago, we highlighted that that was last and final to get us to profitability, and it was about continued growth and expansion of our commercial team and sales force. So at that time, we had 60 sales reps, and we've stated that by the end of the year, we're going to be closer to 85, really functioning at different levels, and hopefully we'll have more of them contributing in this year, and ready to go and scale into next year. We talked about the strong, consistent growth. We launched the two Nodify tests, going right into the pandemic, and so we waited until we got out of the pandemic.
We look at this as if we've launched them in the first quarter of 2022, and those two Nodify tests really are our growth drivers. We just highlighted that we have a first-mover advantage with no competition, and they'll continue to be the growth drivers for quite some time. We talked about the strong performance, and we'll talk a little bit later about our pipeline, those five on-market tests. We've got three additional tests that we hope to be able to drop into those sales reps' bag here in the coming years. The Biodesix business really is divided into two units. We have our lung diagnostic testing, and really highlighting lung. Our commercial team does focus on lung cancer. The complementary side of the business, where we conduct biopharma partnerships and services, there we go broader.
We focus on pan- disease or pan- cancer in partnering with both partners and biopharmaceutical companies. We'll touch on both of these businesses, but I'm going to start with the lung diagnostics portion of the business. When we say lung, sadly, lung cancer remains the deadliest of all cancers. More people this year will die of lung cancer than the number two, three, and four cancers being breast, prostate, and colon. Early detection and diagnosis matters. We've proven that the majority of late-stage lung cancer diagnoses have an average or mean 10.5-month survival. They're not even going to make it to their 1-year diagnosis anniversary. And as you can see, the 5-year survival of a late-stage diagnosis is 6%.
So early detection, early diagnosis, utilizing Nodify, we are confident that we can make a positive impact in the long-term outcomes for these patients. I've referenced the five on-market test. You can see here on the left of this slide, the two Nodify test. Here, we're helping with lung cancer risk assessment by identifying those lung nodules that are malignant and/or those lung nodules that are benign. Once a patient has a malignant result, then we get into our lung cancer diagnosis or treatment guidance portfolio, where we have three products that are helping physicians identify the right or ideal treatment for those patients. We first looked at this and said: How are physicians doing in the absence of our test? Let's look at the historical data.
What we highlighted and demonstrated, or what was highlighted and demonstrated in those articles that we found was that 62% of patients historically having, an intervention or a biopsy, that was unnecessary. They had a benign nodule. So we really focus on those procedures that are not only unnecessary, but costly and can be risky. And so you can see that, that physicians there, were intervening more times than not, and that we saw a big opportunity to help guide them, so that we could bring those numbers down. Then, for those patients that had a surgical resection, and in lung, it truly is a resection, where we're not just talking about removing the lesion, you're actually removing a lobe.
The dire part about that is now you've decreased the patient's pulmonary capacity, but you've also taken away a future treatment option if and when they need it. So one in three patients historically had an unnecessary surgical resection. And then when you look at the opposite extreme, those patients sent to CT surveillance, where they were taking a wait-and-watch approach, you saw one in five that had a malignancy, so we missed it. Now, you're hopeful that those patients are compliant and then show back up in 12 months for a follow-on CT where they could be captured. But again, we're relying on a patient's compliance. So we saw a great opportunity here to provide value and impact.
The Nodify test really is gonna be utilized and offered for patients that present with an incidentally found lung nodule, and those patients are gonna present with more than likely no symptoms. They're gonna look otherwise healthy, and they're gonna have an immediate CT scan. When that CT scan result comes back, the physician first things they're looking for is location of that nodule, size of that nodule, and what are the edge characteristics of that nodule? Is it smooth or spiculated? Spiculated would be rough or have tentacles. They utilize that information to assess and assign a risk of malignancy. What the guidelines will state is that a very high risk of malignancy or very low risk of malignancy, they know exactly what to do, right?
Send the low risk to CT surveillance, monitor them over time for changes or progression. The high risk being greater than 65% risk of malignancy, those are the patients you pull forward and intervene. Unfortunately, 80% of patients that present reside in this middle category, this low to moderate risk category, where 5%-65% risk of malignancy is assigned. If you look at the guidelines, it actually says in that category, it's up to physician judgment. Well, when I go backwards and you look and say: well, historically, what was physician judgment and what was the performance? You saw a lot of interventions. And again, it's not that it was right or wrong, physicians were concerned they were gonna miss something. So it highlights an opportunity to give them more information to make shared decision-making with those patients.
This is where the Nodify test fits perfectly. So one blood draw, we'll run the patient's, we'll run that, the first sample on Nodify CDT. Within 24 hours, we'll return those test results. If that is malignant, we will cancel the remainder. There's no reason to run XL2. And at that point in time, that physician, within that 24 hours, knows that he or she should schedule a follow-on visit because this is a patient they need to pull forward and intervene as soon as possible. That's occurring about 15% of time. That's what we've seen. So 85% of the time, both tests are run, helping reclassify risk, and taking those patients down into a reduced risk category. Those patients with that, that positive Nodify XL2 result, then go into that CT surveillance program, and they'll return on an annual basis.
What they'll be looking for is any type of change in the imaging. Then you can anticipate down the road, as a change occurs, it's another opportunity to utilize the Nodify test post CT scan. I referenced that positive Nodify CDT test result. Here, you're identifying those patients that have a malignancy, and then they go on to intervene, conducting a biopsy or a wedge resection. This is where I stated we offer our treatment guidance portfolio, called IQLung, that's comprised of, Sorry about that. Comprised- backwards here. Comprised of three tests, two of them called GeneStrat. These are genomic test. One is a targeted panel, the other is a broad panel. And then we have our VeriStrat test, which is a proprietary test that we have discovered and developed and commercialized.
Here, we're identifying in a very aggressive disease state where the cancer has potentially subverted the immune system. So thinking of it in terms of wearing out the immune system, it's not able to fight appropriately. A positive VeriStrat result is an indication to a physician that it's time to change the approach, switch therapies. Oftentimes, what we see is a positive VeriStrat result then has patients going into a clinical trial, trying something that is much more aggressive. When looking at lung cancer, I've talked a little bit about the dire consequences. This year, it's estimated that about 235,000 patients in the United States will be diagnosed with lung cancer, and as I stated earlier, the median overall survival for those with advanced stage is 10.5 months.
We talked about our rapid turnaround times, having industry-leading turnaround times. In the absence of our blood-based test with its rapid turnaround times, a tissue biopsy, on average, can take up to 26 days. So where you're dealing with a disease state that potentially has a median overall survival of 10.5 months, there's potential that you're gonna waste one of those months just waiting on test results to then determine the appropriate or accurate, treatment. So that's where we've introduced our genomic test called GeneStrat. Early-stage lung cancer, we suggest utilizing the ddPCR platform. This is a targeted platform. We're focused on six genes that are known to be related to lung cancer. We return these test results back in two to three days.
Here, a physician could easily look at it and say: "I want to know if they're EGFR, KRAS positive, and if so, that will determine which treatment we put them on." We run VeriStrat at the same time, here, giving an indication of how's the patient's immune system? Are they vibrant? Is it strong? Are they still fighting. For late-stage, advanced, and even metastatic disease state or recurrence of lung cancer, this is where we'll offer the broad NGS panel. It's a 52-gene panel. Doing that late stage also is compliant with Medicare guidelines that state these patients should have one branded NGS test per cancer diagnosis per lifetime. And so don't do it early stage. If you do it early stage, you burn that bridge.
And so what you find is that's why there's so many NGS partners out there, is to get around the NGS guidelines through Medicare, they'll offer different providers test. And so for us, we look at it and say, "Don't do that. Come to Biodesix. We'll offer both," because the ddPCR platform can be used throughout the monitoring and surveillance of that lung cancer, and there's no limitations on how many times that can be run by Medicare. Talked a little bit about our pipeline. We have three tests currently in our pipeline, that have been discovered and are at varying stages of validation. I will state that, that given our focus on getting to profitability, we have stated that we're not gonna commercialize or launch these, near term.
We're gonna continue to offer them in a research-use-only capacity to our biopharmaceutical partners, so they can continue to conduct research. We'll give updates on what a commercial timeline might look like for all three of these. Two of them you can see are in the treatment guidance category, where we have a Risk of Recurrence test and a Primary Immune Response test. The Risk of Recurrence test here, we have a blood-based test, a pre-surgical resection, where we're able to identify those patients that'll recur. What's unique here is this is different than MRD because it is pre-surgical resection. We're the only company right now that's discovered a pre-surgical blood-based test that can identify those that will recur.
Primary Immune Response, this is a test that where we can identify, those patients that will respond favorably to an immunotherapy, and consequently, those that will not only not respond favorably, but could advance at a rapid pace, called a rapid progressor state. And then lastly, you may have seen in partnership with Memorial Sloan Kettering and Bio-Rad, we will be introducing, Minimal Residual Disease, or MRD test. And we look forward to providing this in combination with our Risk of Recurrence, being the only company that has a pre-surgical resection and post-surgical resection test that is both genomic and proteomic. So looking at these patients holistically and truly understanding what's going on, not only, with the disease, but also with their immune system. Let's shift gears and talk about the other side of our business.
We've referenced the biopharmaceutical, partnership and services business, where we will partner and focus on supporting biopharmaceutical companies in their clinical trials and research in a pan-cancer or pan-disease focus here. We have partnered with over 60 biopharmaceutical companies, over time, many of the largest in the space. Here, we're partnering with them throughout varied stages of their drug development, helping validate that the test is working. It gives us great value because we get to see the insights, and we get to also run our test on those samples to understand what we can learn. So it really benefits us for future test discovery, future test development, and continuing to be a great partner and provider for these major pharmaceutical companies. This has been a pretty small portion of the business.
It's really not our growth driver. We've stated that it continues to grow. About a year ago, we started talking about the dollars under contract, demonstrating that there was a bolus of interest and more business to come. Most of those contracts are gonna be anywhere from a one to three year time horizon. So when we state that we have $9 million currently under contract, but not yet recognized, those will be recognized over the next two to three years, and that continues to build. So that book of business is growing. We were just here in Chicago at ASCO, and that's one of the major meetings where this team has an opportunity to meet with the major biopharmaceutical players, and proud to share that we had.
We had a great ASCO and are looking forward to sharing the outcomes of that as this business continues to grow. So, Biodesix, again, in summary, massive market. Sadly, lung cancer remains the deadliest of all cancers. You know, we have first-to-market status, first-mover status on the nodule management. No known competition until at least 2028. So a major advantage for us. Industry-leading turnaround times. We've talked about how time matters, and so we've pride ourselves on that, and we've committed to physicians that we'll remain the fastest to deliver test results. The only company with a commercial team focused on lung that also has five on-market tests, all with Medicare coverage, all with private payer coverage. This is a Medicare-heavy population.
Most about 60% of lung cancer patients fit into that 60+ age range, and that also contributes to our exceptionally strong gross margins. You can see here that we've stated and guided that we'll keep it above 75%, but we're really proud to share the 79% at the end of Q1. The consistent growth, right? Seven consecutive quarters of greater than 50% growth. We've been very clear, our sales team needs to continue to grow. The commercial engine is the driver, and with that first-mover status, we're gonna continue to invest and expand our commercial channel. Again, as I stated earlier, hoping to be somewhere in that 80-85 range by the end of this year, and then, striving to get to 100 next year.
And again, we feel that once we get in that hundred range, we'll be right there, around profitability. Adjusted EBITDA, we'll continue to share this as we progress through the year during earnings calls, and we've stated it'll continue to improve, and I fully expect by the end of the year that we'll start giving a tighter timeframe, on what that path and timing to profitability looks like. You know, I'm really proud to have the opportunity to speak to you today, but I really represent what I believe is the best in leading diagnostics team. And to support that team, we just recently moved into a new facility, just outside of Boulder, Colorado, an 80,000-square-foot laboratory, that is world-class.
It allows us to grow for 10+ years, and so there's no major capital investment that needs to be made. This really is an execution play, where our team needs to get out to the 14,000+ pulmonologists out there, and looking forward to providing updates throughout the remainder of this year, and then hopefully getting the invitation to be back here next year at the William Blair Conference, so we can share our continued progress. But thank you all for your time and interest today.
All righty. Thanks, Scott. So we have about 10 minutes. Maybe we'll use a few minutes for Q&A down here.
Yeah.
Then we can go up to Burnham A. for the breakout. You referenced execution play a handful of times, right?
Yeah.
Can you maybe sort of talk about some of the commercial investments that you're making into reps and just sort of market access to further that growth profile of the business?
Yeah, I think the first thing I would state is we've brought everything in-house, no third party, no contractor. Our teams are all integrated. The majority of the team is here in this facility in Louisville, Colorado. So as we bring on sales reps, we've demonstrated historically that new sales reps can pay for themselves within three months. And so that gives us a great line of sight for the timing and the cadence by which we bring them on. As we hit different thresholds in growth, it's easy to start to extrapolate when we need to hire in customer care, billing, national accounts, and support. And so having those teams fully integrated in-house, that's why we say this is an execution play.
We've got the experience, we've done it to this stage, we've got the know-how, we've got the team. You know, what we've seen historically is our sales reps can get to about $1-$1.25 million in sales rep productivity, within about a 12-month period. We have artificially capped that, and what I mean by that is, historically, we've cut territories sooner. We had a couple of reps last year. We had 3 reps that were on a $2 million per sales territory trajectory, and we cut their territories in half. Part of that, not only did we do it intentionally, we did it early. The one thing we wanted to demonstrate to sales professionals was that when we cut your territory, we're not decreasing your earning potential.
We're actually going to make you more effective and more efficient. We're going to decrease territory size, we're going to decrease travel costs, minimize overnights. We're going to embed you in those accounts so that you can function in a consultative fashion, which we pride ourselves on. And so, in those three individuals, as you can imagine, all three were going to be top performers. We cut territories. They remained top performers, and they still are performing at the top. As we grow in scale, we'll stop capping that, and so we'll start to see that sales rep productivity number go up. Yes, question? The sensitivity of the blood test, and Robin, I don't know if we have, It varies by test. It's probably easier to 22. To pull it up here, so you can see. There we go. Slide 22 here.
So these are the two Nodify tests. You can see on the left, Nodify CDT is your traditional rule in test. So what matters here is our positive predictive value and the specificity, so a 98% specificity. Then the opposite side, since there are two tests working in concert, the negative predictive value matters, and you rule out tests for Nodify XL2, and you can see the 98% negative predictive value, where sensitivity matters here in a 97% sensitivity. And then in the others here, then you can see in the other two tests here, or three tests, I should say.
91% sensitivity, 100% specificity for GeneStrat, ddPCR, 95% sensitivity, 100% specificity for the NGS test, and then VeriStrat, again, is measuring the immune response and status. Great questions. Thank you.
You know, you talked about the commercial investment here, right? So and you also talked about you're still in the very early innings and sort of the penetration of this market potential, and there's 14,000 pulmonologists, right? So there's a lot of growth potential here. What's in your control to sort of continue to drive utilization further?
Yeah, you know, we kind of look at it in two forms. You have a bottoms-up effort, which is what we think our sales professionals do on a day-to-day basis, and it tops down. And this is an extension of the prior question, where you look at it and say, having a fully integrated team, that tops down, we have a national accounts team, right? That's out there working. So this is in our control. The timing may not be in our control. So they go out and they work with payers, they work with integrated networks, and so what we're looking at there is giving them performance data, tracking metrics, showing that these tests provide a value to them.
The sales professionals, they do the same, but when they're working bottoms up, they're going out, they're educating, they're informing, they're empowering on the test, how it fits into their workflow, how they can utilize those test results, and then all the offerings we have. So whether it's ordering via our portal or integrating into an EMR, it's educating and informing them how we've done that and how they can utilize that. It's all in our control. It really is just at varied stages or timing. The one thing we know when it comes to payers and providers is the longer track record you have and the more data you have, the easier it becomes. And so we really aren't that bullish on talking about that.
We want to go out and make sure that we have the coverage, and then we'll disclose which coverage we have. But I would say it's all in our control. I think the things that are outside of your control are going to be things like guidelines, when you start to say: What are the industry groups doing in terms of updating their guidelines? For us, there's a great opportunity here because the guidelines that would be most appropriate would be the ACCP or the CHEST guidelines, and those related to lung nodule management have not been updated in over 10 years. So that annual meeting is in the fall of each year, October, November timeframe. And so we're eager to see if the Chest physicians make an update.
Now, what is in our control is continued to publish, get as much data out there. We pride ourselves on, on data development, and we're continuing to do so. We published our ORACLE study in the third quarter of last year. This was our real-world registry study, where we were able to confirm that the test in the real world, for Nodify, that is, the test is performing equal to the validation study, which is not always the case. And not only did it perform equal to, it actually improved in a real-world environment. Subsequently, we also were able to demonstrate that utilizing the Nodify test, you had a 74% reduction in unnecessary, invasive, costly procedures.
And then, about the same time we published that, we had a physician-initiated study, three different groups in different locations across the United States, published their data, and they had a 74% reduction also. So, a lot of data out there that validates and verifies what we've said about these tests. And then we have our prospective trial, ALTITUDE, that we're continuing to invest in, which is being conducted at a number of major academic institutions around the United States. At this time, we're not anticipating an interim data report out or analysis this year. That study is being managed by a DSMB. That Data Safety Management Board will guide and control when we publish and if we publish early on an interim analysis.
So we're not expecting or anticipating to do that, but I think that's the key. The things you control really are, is how the team shows up, how they act, how they represent the test and the data you have, how you continue to invest in data development, and all of that hopefully starts to lead others. It's just what's their timeline look like?
Well, that was a great tease on probably some of the questions that we'll get upstairs. So, we'll go to the breakout, Burnham A.