Greetings, and welcome to the CareDx Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.
Greg Haidacek, Managing Director. Please go ahead, sir.
Thank you. Good afternoon and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ending September 30, 2020. The release is currently available on the company's website at www.caredx.com. Peter Maag, Chief Executive Officer Reg Cito, President and Chief Business Officer and Michael Bell, Chief Financial Officer will host this afternoon's call.
Before we get started, I would like to remind everyone that management will be making statements during this call that include forward looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements. All forward looking statements, including without limitation, our examination of historical operating trends, expectations regarding coverage decisions, pricing and enrollment matters and other and our future financial expectations and results are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, October 29, 2020. CareDx disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections or other forward looking statements, whether because of new information, future events or otherwise. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release filed with the SEC.
I will now turn the
call over to Peter.
Thanks, Greg, and good afternoon, everyone. I'm excited to talk to you today about our outstanding third quarter results and the great work our company is doing to improve the lives of transplant patients and caregivers. Before I get to our quarterly results, I would like to thank every member of the CareDx team once again. We have asked a lot from our team during these trying times and they continue to bring their A game. Their tireless work and dedication to transplantations is driving our company to record financial results.
In the Q3 of 2020, we reported revenue of $53,400,000 an increase of 58% compared with the Q3 of 2019. Once again, our year over year growth primarily came from our testing services with revenue of $45,500,000 Product revenue for the quarter was 5,400,000 and digital and other revenue added $2,500,000 to the top line. We have shown that because of our strategy to lean in and to expand our teams, CareDx has never been stronger and it is a pleasure to have seen REG grow into the CEO position in this long planned transition, which we announced earlier today. You have seen us executing a successful business strategy to become a leader in precision medicine combining patient impact, incredible growth and building a valuable profitable company. The same has been true for our people strategy.
Resh joined the organization in 2018 and has worked closely with me, the Board of Directors and the management team to set the company's strategic direction. Reg has also led the commercial, clinical, manufacturing and research and development organizations over the past 2 years, which has significantly and positively impacted the company's performance. Resh has also been instrumental in CareDx's evolution and has successfully executed multiple major initiatives most notably the acceleration of the penetration of AlloSure. In my new active role of Executive Chairman, I'm looking forward to working together with REG in the years to come to continue to build CareDx into an incredible powerhouse in transplant care and beyond. As we accelerate the growth from our existing platform.
Over to you, Reg. Good afternoon, everyone. Firstly, I
want to thank Peter for his dedication and leadership in building CareDx from its IPO to where it is today. It truly is a special place that he's helped shape and build. Secondly, I'm deeply honored that the Board has placed their faith and trust in Medi League Kdx during this next chapter of growth and evolution. And thirdly, I'm extremely fortunate with Peter staying on as Executive Chair, They'll be able to continue this journey together in a seamless fashion. As many of you know, he's been a mentor of mine for more than 20 years.
With that said, this is such an exciting growth phase for KDX. We've been very successful in our response to COVID-nineteen. We provided over 21,800 AlloSure kidney and AlloMap heart patient results in the 3rd quarter, an increase of 65% year over year. When the number of COVID cases began to accelerate here in the U. S, we made a strategic decision to go on the offensive and invest in areas that will drive growth and create near and long term shareholder value.
As we mentioned during our Q2 call, we look to allocate our capital wisely to position our company for robust growth and some of these investments are already bearing fruit. The first of these investment areas is our direct patient capabilities. Over the past several months, we've built out our community nephrology outreach team. As a reminder, community nephrologists provide care to transplant patients once they are safely discharged from the transplant center supervision. Through our newly formed group, we will encourage patients and their caregivers to continue to utilize AlloSure to manage the health of their transplant.
Also as part
of our outreach program, we recently launched our AlloCare mobile app. This patient centric resource was designed to help transplant patients better manage their medication adherence, coordinate our short scheduling with patient care managers and measure health metrics. We believe this comprehensive app will bring simplicity to the complex care regimen of maintaining long term health post transplant. Another area of investment that continues in our mobile phlebotomy offering is what we call RemoTrak. RemoTrak offers transplant patients the ability to have their blood drawn without the need to leave their homes.
To date, approximately 150 transplant centers are offering RemoTrack to their patients and over 5,000 kidney, heart and lung transplant patients have enrolled. For the Q3, tests originating for mobile FelonMe made up between 30% to 40% of our test results. As expected, this rate was lower than the 40% plus level we experienced in the 2nd quarter as clinicians and patients are more aware of how to reduce the risk of acquiring or transmitting coronavirus. That being said, we believe RemoTrak is a valuable service offering to transplant patients and their caregivers. The 3rd area of our strategic investment is the continuous development and communication of new clinical data and the support of peer reviewed publications.
Early this month, we announced the publication of positive clinical data for AlloSure Lung from the multicenter LIGO study. This study demonstrated that AlloSure Lung could identify patients with acute cellular rejection, a critical need for lung transplant patients whose only other option to detect rejection is an invasive bronchoscopy. With lung transplant patients having the lowest survival rate of any solid organ transplant, we believe having a non invasive surveillance tool like AlloSure can be a game changer for improving the lives of lung transplant patients. We submitted our dossier to MolDX earlier this summer, which we recently updated with the newly published LIGO data. Regarding the communication of clinical data in a virtual world, we think it's essential to develop innovative approaches to provide continuing education opportunities to the transplant community.
We're achieving this by attending virtual industry conferences using new tools to communicate with clinicians and patients, hosting virtual call events. In early September at the Virtual International Congress of the Transplantation Society, we hosted 4 industry symposia, showcased 6 posters and sponsored the plenary session. Not to rest on our laurels, we continued our industry presence by conducting a talk on Allstate TX17 and presenting 9 posters on CareDx offerings at the American Society for Histo Comparability and Immunogenetics Conference. Last but certainly not least, there were 10 publications print out about CareDx solutions in the Q3, including 2 of the subjects our recently announced pivotal AlloSure lung data. Regarding our ongoing single studies, we saw an acceleration in our OCRA study enrollment during the Q3 compared to the Q2.
Barring a significant increase in hospitalizations due to COVID-nineteen in the Q4, we expect Okra to remain at the pace we experienced in this past quarter. For our SHORE study, the utilization of heart care continued at the rate we saw in the Q2 as many transplant patients switched their biopsy protocols to AlloSure. While we reported 28% year over year growth on our products business for the Q3, this business is still negatively impacted by the COVID pandemic, because hospitals and transplant laboratories across the U. S. And Europe continue to restrict access to their facilities for some non essential personnel, it has been difficult for us to gain much traction for our best in class product solutions.
Finally, we're very excited this month to receive final Medicare coverage for AlloSure Heart after a rigorous technical assessment by MolDX program, it determined that our non invasive AlloSure Heart Surveillance testing protocol is a valuable solution for managing transplant patient care. This decision also paves the way for heart care. The combination of AlloSure Heart and Alimat Heart to be made available to providers and patients. We expect to hear reimbursement news from MolDX before the local coverage becomes effective in mid November. Now, I'll hand over to Mike to discuss our financials.
Mike?
Thank you, Reg. Turning first to the income statement. Total revenue for the Q3 was $53,400,000 a year over year growth of 58%. Our top line growth was driven by AlloSure Kidney and AlloMap Heart, which saw accelerated penetration this quarter. As a result, testing services revenue in the Q3 increased 61% year over year to $45,500,000 dollars Our Q3 product revenue increased to $5,400,000 and our digital and other revenue was $2,500,000 Moving to our gross margins.
For the Q3 of 2020, the gross margin was 68% compared to a gross margin of 66% in the same period of 2019. The non GAAP gross margin for the quarter was 71% compared to 69% in the Q3 of 2019. On a sequential basis, the non GAAP gross margin recovered by approximately 300 basis points compared to the Q2 of 2020, primarily due to the significant increase in lab testing volume supplemented by the slight decrease in the proportion of tests originating from RemoTrak and other mobile phlebotomy services. For the Q3 of 2020, net loss was $2,800,000 compared to a net loss of $1,800,000 in the same period of 2019. Our net loss per share was $0.06 for the quarter compared to a net loss per share of $0.04 in the Q3 of 2019.
Non GAAP net income was $5,100,000 in the Q3 of 2020 compared to non GAAP net income of $900,000 in the same period of 2019. Our non GAAP net income per share in the Q3 of 2020 was $0.10 compared to a non GAAP net income per share of $0.02 in the same period of 2019. As a reminder, we define adjusted EBITDA as non GAAP net income before interest, income tax, depreciation, amortization and other income and expense. For the Q3 of 2020, we recorded positive adjusted EBITDA of $5,600,000 which is an adjusted EBITDA margin of 10% compared to adjusted EBITDA of $800,000 and a margin of 2% in the Q3 of 2019. Net operating cash flow was positive $5,200,000 in the Q3 of 2020, and we closed the Q3 with $214,000,000 cash.
As a reminder, in April, we received $20,500,000 from CMS through its advanced payment program. Based on recent CMS announcements, we now expect CMS to begin to recoup this prepayment in April 2021. We are extremely pleased that in the Q3, we were able to get our gross margins back on track after the impact of Brimotracker in the Q2 and that we were able to deliver such strong adjusted EBITDA margin and positive operating cash flow despite the continued investments that we've made across our operating expense line. As Reg mentioned, we have strategically invested in our future and have been on the offensive to drive growth and ultimately shareholder value. We'll continue to allocate capital with a focus on top line growth by developing our pipeline and expanding our sales and marketing efforts beyond transplant centers by going direct to patients and community nephrologists.
Turning to guidance, while we have seen many transplant centers return to some level of normality over the last couple of months, there is still much uncertainty surrounding the ongoing impact of COVID-nineteen on our business. And as such, we will not currently be providing revenue guidance for the full year 2020. I'll now hand back over to Peter to close out.
Thank you, Mike. In closing, the Q3 was another record quarter for KDX. Despite COVID-nineteen affecting all aspects of our employees' life, we continue to develop and deliver new and unique solutions to improve the lives of transplant patients and their caregivers. Over the past several months, our company has shifted into a higher gear and we will continue to keep our foot on the accelerator. CareDx has built a platform in transplantation, which may shape the future of this exciting therapeutic area in many ways.
As an example, I would like to invite the investor community to a virtual meeting, Innovation and Transplantation on Thursday, November 5th on 1 to 2:30 pm Eastern. Finally, I would like to congratulate Reg on his appointment to CEO and I look forward to working closely with him as well as the rest of the organization to continue to build CareDx into a powerhouse in transplant care. Thank you all for joining and we will now open the call for questions.
Thank you. At this time, we'll be conducting a question and answer session. The first question is from Brandon Couillard, Jefferies. Please go ahead, sir. Hey, thanks.
Good afternoon.
Good afternoon, Brandon.
Peter, clearly, you've been at this a long time in the CEO position. Just curious if you could elaborate just why now is the right time for this transition. Barez, I would be curious if you have any potential changes in strategy or approach perhaps around M and A that you might like to pursue? And Peter, do you think you will pursue other opportunities outside of CareDx
near term?
No, Bren. Thank you so much for the question. I was joking a little bit with the team. I'm moving now from overtime to full time on this position. I'll continue to focus on CareDx.
I'll be working with Reg on the next phase for the company, which I think is incredibly exciting.
Yes. Thanks, Peter. I mean, Peter and I worked very closely over the last few years on the strategy and the growth of the organization. And I've managed across all the business lines. I don't expect there to be any significant changes in the strategy.
In terms of the corporate development, I've also been involved in all the different activities we've been doing over the last 2 years. So again, that's part of the normal path and course of what we've developed.
Thanks. And then, question, Reg or Peter, you hired a significant amount of additional patient care managers in the period. Curious just if you could perhaps quantify the initial impact from those new hires and really how you think about potential utilization of these reps or productivity either by tests or surveillance or centers as they sort of continue to mature I guess
over the next few quarters?
Yes, thanks. I mean, we see the PCM truly as a strategic asset, which has played a key role typically during COVID and our response with RemoTrack. I think some of the key things to note is that when our patient care managers actually schedule the patients, it's actually a much higher adherence than when the centers do it themselves. I think at the same time, we're seeing benefit from them having a direct relationship with the patient typically as we now move to offerings such as AlloCare. So really has been a real strategic asset for the organization.
I think we're seeing the benefits of that as well. It should be noted that we have more than 5,000 patients now on Remotract. So that's also being part of the reason why we've expanded with the PCMs.
Okay. And maybe one for you, Michael. Any color you maybe share with us as far as just kind of the investment plan or OpEx outlook, if only just for the Q4, would be helpful.
Yes, Brandon. Throughout the year, and I mentioned it on the scripted remarks, we've continued to invest really on the research and development pipeline and also the sales and marketing. I would say for Q4, I mean, you should expect us to continue that investment and continue the increase. I would expect sequentially our operating expense to increase again in Q4 as it did in Q3.
Very good. Thank you.
The next question is from Steven Ma, Paper Sandler. Please go ahead, sir.
Great. Yes, good afternoon, everyone. Steven, good to have you on. Yes, yes. Congratulations, Peter.
Yes, it's been a great run. Congratulations for all you've done to build CareDx to where it is now. And I believe it's in good hands with Reg and a well deserved transition for you to go from overtime to just working full time. So, well deserved.
Thank you very much, Stephen. And you've been following the story for a long time. And there's so much opportunity yet as we're executing on this $2,500,000,000 TAM in kidney. And we're just in the beginning with heart and lung with so many growth drivers on the company. I'm so excited of handing this over to Reg.
Yes, yes. No, it seems like
a good timing and yes, I think it's great. So yes,
so maybe just moving on to questions.
I know you got the heart care decision. Do you have any indication on the heart care pricing?
Hi, Stephen. It's Mike here. No, not yet. I think we mentioned again earlier in the call that we're expecting to get the reimbursement news or the pricing by the middle of November, which is when this will go effective. But yes, as yet, we have no we've got no additional information.
Okay, great. And then on kidney care, could you remind us again on the timelines and when you're going to submit for Medicare reimbursement?
On kidney care for reimbursement, we're still continuing on with kidney care as part of OPRA. So it's part of our ongoing clinical study that we're doing at this stage.
Okay, got you. Okay. And then finally on RemoTrak, I know it's hard to predict what the steady state level is as a percentage of volume will be. And I know TransCon Synodys have reopened. But could you give us a sense of what you think the steady state level will be going forward maybe in like a 2022 sort of like a post pandemic run rate?
Yes. I think for us steady state high stretch, we expect to be around the 40% mark. I think it's something that we're seeing that's a fairly relatively consistent number. And also with COVID, there's uncertainties there that would certainly lead to more remote track usage as well.
Okay, got you. And the and can you give us a sense on how patient adherence has improved with Remotrach given continued COVID-nineteen pandemic issues?
Can you just give us a sense of some color? Yes. What we've seen is we schedule patients with non Remotrach and Remotrach and there has been actually an increase in adherence with the use of RemoTrack and more importantly when we actually schedule patients through our patient care managers and there's significant is what the centers do themselves. Patients more importantly, they actually really like the offering and I think that's one thing that's been a bit of a pull for them to actually do more of it. And that's one of the drivers, the ability quickly during this time to have a blood draw at home.
It's really been something that's really compelling. I mean, more than 9 in 10 patients really in the feedback have shared that this is something they want to continue doing moving forward.
Yes. And that's the sense
I'm getting as well. Yes. Yes. And we also think
it makes sense that you don't compromise. Yes. I'm sorry.
Also with the launch of Alacare, I think this enables an additional point of direct patient contact as well. I think it's a nice patient continuum. We have obviously our patient care managers calling up these patients at transplant center also calling them when they leave the transplant center, but we also have now a way of connecting patients through Alacare as well, our digital patient app. So it's all part of the plan to continue this sort of interaction with the patient. Yes, that makes a lot of sense.
And maybe I can squeeze one last in, one more in for Mike. Given RemoTrak is going to be a significant part of the volumes going forward, I know the margins are impacted with the phlebotomy. Can you give us a sense of how you can get to your stated goal of 75% long term gross margins? Thank you.
Yes, Stephen. And obviously, this quarter and third quarter, we recovered really nicely on our gross margins back to where they were in the Q1. So we sort of got over that Remo track hump already. And that increase that improvement in Q3 was down to the volume coming into the lab. And I think as we look going out, as the volume continues to increase, then that's going to naturally drive improvement in the margins.
But also we've got a lot of efficiency and optimization projects happening in the lab at the moment. So they'll drive that. Then of course, on the top line, and we've mentioned this before, as we get additional reimbursement and whether that's for AlloSure Heart or we get private payer reimbursement that coming through for AlloSure and Kidney, as we drive the increase in average reimbursement, that's also going to drop down to the gross margin and the improvement. So I think we're feeling really comfortable that we can get to 75% gross margin.
There is a question from Alex Nowak, Craig Hallum Capital Group. Please go ahead, sir.
Great. Good afternoon, everyone, and congrats Peter and Reg on the transitions here. You've put up some really impressive growth during a tough quarter. We touched on it a bit during the call. You mentioned that this is a culmination of all of your investments.
You have RemoTrack, more patient care managers out there that focus on protocols. You also have just a general push to go to liquid biopsy. But I was hoping you could kind of signal out for one of us is what is the most beneficial investment that you saw during Q3 generating the highest ROI in the quarter? And how do you think about that benefit continuing into Q4 and beyond?
Yes. I think the most recent investment we made is the patient care managers who continue our DTP strategy. I think it's really important for us as we build that connectivity, not only within the patient within transplant center, but moving out in back into community as that sort of last mile. And I think what we've seen is typically during COVID, the response to COVID, the response to RemoTrack has been amazing and to be the offering they like. I think now we're adding additional things as part of that suite to continue that relationship.
So it's building that relationship with the patient and clearly that all starts with the patient care managers, we offer this premium white glove service.
Got it. And to that point, are you starting to see the results of your investments within the community nephrology in this quarter or is that all still at the top?
Yes. We've built out our community nephrology team and we're beginning to see, some early benefits of that plan and strategy. We don't break out those numbers, but what we can say is that we're very pleased with the results that we've seen so far over the last 3 months.
Okay, got it. And then given all the advancements that Medicare is doing to drive more kidney transplants, what should be the underlying growth rate of that market for the next several years? And of all the programs that have been announced around kidney transplants and essentially moving people to perform a kidney transplant, what else needs to be done by either CMS or others to get to that doubling of kidney transplant in 5 years?
That's a great question, Alex. And that's something that maybe I am happy to take on a little bit to understand that dynamic better because there are very few industries where only 20% of the supply of the demand is actually met, right. If you're thinking about for every transplant that we do, there are 5 more that we could do if we had enough organ. And so there is this latent demand and increase of organs will tremendously accelerate life of patients and the entire industry and ultimately benefit CareDx as well. So doubling of the organs within 5 years, I think that is the stated goal.
We probably had a bit of a curveball with COVID-nineteen, but we see transplant centers already back to full swing and many transplant centers are actually above the previous year. So I have no doubt that there is a lot of opportunity that we can do. Now the most important element is that number 1, people go and donate organs. Number 2 is that these OPOs, these organ procurement organizations are efficient and effective. And I think there's a lot of room to grow in the future.
That's great. And then just last question for me. It looks like we're entering what would be called the 3rd wave here in the U. S. For the COVID cases.
With everyone's eyes and ears at CureDx focused on the transplant centers, what are you hearing about another wave regarding transplant volumes? Are they foreseeing more shutdowns or slowdowns like April or May or do they know how to better manage the virus now that transplants will continue?
Yes. Thanks, Isaac. I mean, what we're seeing is that region by region, center by center response and there's even some variability within locations. And what we've found is they're built covering more than 150 transplant centers across the United States. We have really good insights into what they need and what.
And I think in response to COVID, RemoTrack continues to be an offering where we have seen continual increase more than 150 transplant centers today. So I think that ability to respond and react to the needs has been really important for us across all different organs from kidney to heart and also lung.
That's great. Well, appreciate it. Thank you.
Thanks again, Alex.
We have a question from Andrew Cooper, Raymond James. Please go ahead, sir.
Hey, guys. Congrats Peter and Reg. A lot of kind of the core is being covered. So maybe I'll take it a little bit of a different direction into the product bucket. Just as we think about, obviously, your access to centers and to potential customers being limited.
When we think about the European markets and the competitive environment and your access there, what's the path or how should we be thinking about the path or particularly how is the csg and A as you try to maybe move more into that European market in the post transplantation space?
Yes. On the product side, I think if we look at the typing business, I might just cover that firstly that requires demos and demonstrations. I think what we've found there is we've shifted pretty much to what we've done in the U. S. To virtual sort of a process.
And I think that will be starting to see more events. I think it was building the 1st in class virtual marketing capability, which has been recognized by many of our peers as well. So I think that's from the spike in business ex U. S. I think in terms of Sulfur DNA, we continue to have strong interest and I think this is an area where we continue to work with our payables into us.
The benefit of having some direct infrastructure particularly in Europe has enabled us to do that. The other thing is we have many of other folks in the U. S. Who have key from the leaders in Sportage House who have actually been talking to their colleagues in Europe as well to make sure that there is a continuation of that information flow as well as why there is so much excitement about AlloSure and now translating ex U. S.
And AlloSeq cell free DNA.
Okay, great. That's helpful. And then I know it was sort
of brought up in a question already, but just as we think about kidney care, sorry about that. As you think about kidney care, is there anything that you take away from the conversations you've had whether with potential customers or anywhere through the pipeline around heart care that have changed how you think about the potential for that product longer term?
Yes, absolutely. I think that's really I was about to lead into that because I think what healthcare has been able to demonstrate is things that we've been trying to push with further innovation. As many of you know on the phone, we're the first to bring gene expression profiling to transplant. We're the first to bring cell free DNA into transplant. I think as you look at the combination of the multimodalu approach, it's really, really important.
In terms of ARPSA though, that was the first approved through MolDX demonstration. And for us, it really validates our approach, but he's showing that we could maybe a trailblazer. I mean, one thing that's never lost on KDX is drive innovation, the plank that we do every day. And it's the front of what we want to do as a company. So in that sense, translating that to kidney care, we've taken the same approach.
And I think in addition to the cell free DNA and the gene expression profiling, we've also added the ability of Ibox, which is really a validated algorithm in transplant flank that we believe will make a meaningful difference. In addition, we've also got Uramap and histimap as additional offerings that we're working on as well. So again, this kidney care multi modality is really the foundational base for the future in transplant.
Okay, great. And maybe just one more after the equity raise earlier in the year as we think about you guys potentially being more active in the M and A landscape. Just
any comment on sort of
what you're seeing out there? Has COVID perhaps stressed some players financially where more is bubbling to the surface or anything we should think about in terms of where you may or may not be looking, any update would be great?
Yes, I mean, think of the equity raise, it got us to be at a ratio similar to our peers, at least the median. That's the first one I'd like to make. Secondly, we have multiple business lines, not just the testing services, but we also have the products and digital business. And there are multiple opportunities over the last few years that we continue to monitor and be in discussion. So it's like that is part of our normal course, but we believe that there remains to be attractive options and we'll see what happens as we continue to monitor those.
Great. I'll stop there. Thanks.
The next question is from Sung Ji Nam, BTIG. Please go ahead.
Hi, thanks for taking the questions and congratulations to both Peter and Raj. I was wondering about AlloSure lung. Could you remind us what the market opportunity there is in lung transplant? Just trying to get a sense of how many bronchoscopy procedures do patients undergo for reduction monitoring in the 1st year and then following the 1st year?
Yes. I would think of AlloSure Lung as similar size to heart. There are about 3,000 patients in terms of that opportunity. Now with lung transplant patients, this is sort of one of the highest mortality conditions. And with that, there actually is a lot more testing in the 1st year.
And so I think with the protocol frequency that we are sort of establishing is originally initially 744, but we believe that maybe with some of the feedback we're getting that there's a need to continue this maybe even the highest abounds as we look at
that. And just to reiterate what Reg was saying, lung has one of the problems that these patients don't live for the 10 to 15 years that we see in kidney and heart, but they probably have a 5 year device. So in terms of the tail, this is not as a big opportunity, but it's very exciting because the unmet need is so significant. And so the publications that Richard was talking about, we have now 3 major publications on cell free DNA or other store in lung, which is very exciting. So I think here we benefit of taking the existing platform, go into this field, which is very adjacent and might be able to quickly, quickly accelerate on lung.
Great. That's helpful. And the recent Medicare NCD announcement, which obviously was largely a non event, but just kind of curious, is that something you guys might pursue in the future? Could there be any benefit from pursuing the NCD route?
I think that the reimbursement landscape in molecular diagnostic continues to evolve. I think the company in general has had a phenomenal run-in making sure that our products are high value diagnostics products and are recognized as such. I think we are very comfortable with current approach to MolDX, which is a data driven approach and getting through reimbursement through MolDX and then Iridium. But we were constantly evaluating other routes. So maybe going dual track one day might be an opportunity with a combination between the FDA and a central office approach.
But right now I think the heart care reimbursement is really opposed to child and how we have thought through combining our multi modality offerings and we're very comfortable with the current approach.
Got you. Great. And then maybe a couple of quick ones for Mike. What was the Alacel revenue contribution this quarter? And then would you be able split the volume out the split of the report volume for AlloMap Heart versus AlloMap I'm sorry AlloSure Kidney this quarter or for year I guess year to date?
Well, first of all, on AloCell, similar to the previous quarter, it's a bit less than $100,000 So still early days yet for Allocel. And we hope to be announcing more on that as we move forward. Splitting out the volumes. Now I think the way that we look at testing services is in total commercial volume for both AlloMap and AlloSure. And so, yes, the volume was 21,800 for the quarter, which was fantastic growth.
But no, we're not splitting that out.
Okay, sounds great. Thank you so much.
Thank We have a question from Yi Chen, H. C. Wainwright. Please go ahead. Thank you for taking my questions.
First question is, which factor contributed more for the volume growth in patient results this quarter? Is it penetration in transplant procedures at each transplant center or patients becoming more compliant with surveillance protocol with Remotrk?
Yes, both have been significant levers for us. But I think the hallmark of our growth has been with the driving the protocols and we continue we're more than 50 protocols continue to grow each quarter. So it's such a simple opportunity for us as each center develops the AlloSure specific cell free DNA protocol.
And maybe to add to this, we are so early still that there's new patients coming onto the platform all the time. So we are right now, depending on how you look at it, 5% to 10% penetrated. So the growth is primarily still driven by new patients coming onto the platform, while at the same time, Res was mentioning with our patient care managers, we might edge up on the compliance rate and the adherence. But right now, our growth continues to be very dynamic by new patients being added to the platform.
Got it. Thanks. Next question is sales and marketing expenses have shown a decreasing trend as a percentage of total revenue for the first 3 quarters. Do you expect that trend to continue?
I think that will continue, Yi. But having said that, we will still be continuing to invest in sales and marketing. In the that expense line grew sequentially in Q3 because we've added all of the patient care managers and we're still investing in that and we're focusing on community nephrology. So I think it will still continue to grow, maybe not as fast as the revenue growth.
Got it. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. Now I'd like to turn the call back over to Peter Maag for closing remarks.
Well, thank you very much for joining as we are building a tremendous powerhouse in transplantation. Thank you very much and looking forward to future discussion. We'll keep you updated. Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.