Greetings, and welcome to the CareDx third quarter 2020 earnings conference call. At this time, all participants are in listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Greg Chodaczek, 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 Seeto, 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 fact 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 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 descriptions 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 29th, 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 transplant patients is driving our company to record financial results. In the third quarter of 2020, we reported revenue of $53.4 million, an increase of 58% compared with the third quarter of 2019. Once again, our year-over-year growth primarily came from our testing services, with revenue of $45.5 million. Product revenue for the quarter was $5.4 million, and digital and other revenue added $2.5 million 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. Reg 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 two years, which have significantly and positively impacted the company's performance.
Reg 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 me to lead CareDx during this next chapter of growth and evolution. Thirdly, I'm extremely fortunate with Peter staying on as Executive Chair, that we'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 CareDx. We've been very successful in our response to COVID-19. We provided over 21,800 AlloSure Kidney and AlloMap Heart patient results in the third 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 would drive growth and create near and long-term shareholder value. As we mentioned during our second quarter 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-to-patient capability. 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're 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 AlloSure 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 RemoTraC. RemoTraC 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 RemoTraC to their patients, and over 5,000 kidney, heart, and lung transplant patients have enrolled. For the third quarter, tests originating from mobile phlebotomy made up between 30%-40% of our test results.
As expected, this rate was lower than the 40%+ level we experienced in the second quarter, as clinicians and patients are more aware of how to reduce their risk of acquiring or transmitting coronavirus. That being said, we believe RemoTraC is a valuable service offering for transplant patients and their caregivers. The third 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 multi-center LARGO 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 early this summer, which we recently updated with the newly published LARGO 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 care events. In early September, at the virtual International Congress of The Transplantation Society, we hosted four industry symposia, showcased six posters, and sponsored the plenary session.
Not to rest on our laurels, we continued our industry presence by conducting a talk on AlloSeq Tx 17 and presenting nine posters on CareDx offerings at the American Society for Histocompatibility and Immunogenetics conference. Last but certainly not least, there were 10 publications printed out about CareDx solutions in the third quarter, including two of the subjects our recently announced pivotal AlloSure Lung data. Regarding our ongoing clinical studies, we saw an acceleration in our OKRA study enrollment during the third quarter compared to the second quarter. Barring a significant increase in hospitalizations due to COVID-19 in the fourth quarter, we expect OKRA to remain at the pace we experienced in this past quarter. For our SHORE study, the utilization of HeartCare continued at the rate we saw in the second quarter, as many transplant patients switched their biopsy protocols to AlloSure.
While we reported 28% year-over-year growth on our products business for the third quarter, 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 were 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 HeartCare, the combination of AlloSure Heart and AlloMap 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 third quarter was $53.4 million, a year-over-year growth of 58%. Our top-line growth was driven by AlloSure Kidney and AlloMap Heart. We saw accelerated penetration this quarter. As a result, testing services revenue in the third quarter increased 61% year-over-year to $45.5 million. Our third quarter product revenue increased to $5.4 million, and our digital and other revenue was $2.5 million. Moving to our gross margins. For the third quarter 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 third quarter of 2019.
On a sequential basis, the non-GAAP gross margin recovered by approximately 300 basis points compared to the second quarter of 2020, primarily due to the significant increase in lab testing volume, supplemented by the slight decrease in the proportion of tests originating from RemoTraC and other mobile phlebotomy services. For the third quarter of 2020, net loss was $2.8 million, compared to a net loss of $1.8 million 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 third quarter of 2019. Non-GAAP net income was $5.1 million in the third quarter of 2020, compared to non-GAAP net income of $0.9 million in the same period of 2019.
Our non-GAAP net income per share in the third quarter 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 third quarter of 2020, we recorded positive adjusted EBITDA of $5.6 million, which is an adjusted EBITDA margin of 10%, compared to adjusted EBITDA of $0.8 million and a margin of 2% in the third quarter of 2019. Net operating cash flow was positive $5.2 million in the third quarter of 2020, and we closed the third quarter with $214 million cash. As a reminder, in April, we received $20.5 million from CMS through its advanced payment program.
Based on recent CMS announcements, we now expect CMS to begin to recoup this repayment in April 2021. We are extremely pleased that in the third quarter, we were able to get our gross margins back on track after the impact of RemoTraC in the second quarter, 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-19 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 third quarter was another record quarter for CareDx, despite COVID-19 affecting all aspects of our employees' lives. 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 in Transplantation, on Thursday, November 5th, from 1:00 to 2:30 P.M. Eastern.
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. We will now open the call for questions.
Thank you. At this time, We will be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. 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. Reg, would be curious if you have any potential changes in strategy or approach, perhaps around M&A that you might like to pursue. Peter, do you think you'll pursue other opportunities outside of CareDx? Your turn.
No, Brandon, 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.
Yeah. Thanks, Peter. Peter and I have 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 two years. Again, that's part of the normal path and course of what we've developed.
Thanks. 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.
Thanks. We see the PCMs truly as a strategic asset, which has played a key role typically during COVID in our response with RemoTraC. 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. Really has been a real strategic asset for the organization, and 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 RemoTraC. That's also been part of the reason why we've expanded with the PCMs.
Very good. Maybe one for you, Michael. Any color you may share with as far as just the investment plan or OpEx outlook, if only just for the fourth quarter? Be helpful. Thanks.
Yeah, Brandon. Throughout the year, and I mentioned it on the descriptive remarks, we've continued to invest really on the research and development pipeline and also the sales and marketing. I would say for Q4, 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 Mah, Piper Sandler. Please go ahead, sir.
Oh, great. Yeah. Good afternoon, everyone.
Steven, good to have you on.
Great. Yeah. Congratulations, Peter. It's been a great run. Congratulations for all you've done to build CareDx to where it is now. 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. Well deserved.
Thank you very much, Steven. You've been following this story for a long time and there's so much opportunity yet, as we're executing on this $2 billion, $2.5 billion 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.
Yeah. No, it seems like a good timing and, yeah. I think it's great. Yeah. Maybe just moving on to questions. I know you got the HeartCare decision. Do you have any indication on the HeartCare pricing?
Hi, Steven. 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. Yeah, as yet, we've got no additional information.
Okay, great. On KidneyCare, could you remind us again on the timelines and when you're going to submit for Medicare reimbursement?
On KidneyCare for reimbursement, we're still continuing on with KidneyCare as part of OKRA. It's part of an ongoing clinical study that we're doing at this stage.
Okay, got you. Okay. Finally on RemoTraC. I know it's hard to predict what the steady state level is as a percentage of volume will be. I know transplant centers have reopened. Could you give us a sense on what you think the steady state level will be going forward, maybe in like a 2022, sort of like a post-pandemic run rate?
Yeah, I think for our steady-state type ratio, we expect to be around the 40% mark. I think it's something that we're seeing that's a fairly, relatively consistent number. Also with COVID, there's some uncertainties there that would certainly lead to more RemoTraC usage as well.
Okay. Got you. Could you give us a sense on how patient adherence has improved with RemoTraC given continued COVID-19 pandemic issues? Can you just give us a sense of some color?
Yeah. What we've seen is we schedule patients with non-RemoTraC and RemoTraC, there has been actually an increase in adherence with the use of RemoTraC. More importantly, when we actually schedule patients through our patient care managers and there's significant increase versus 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, particularly during this time, to have a blood draw at home, has really been something that's really compelling. More than nine in 10 patients really, in the feedback, have shared that this is something they want to continue doing moving forward.
Yeah. That's the sense I'm getting as well, yeah.
Yeah.
Yeah. It makes sense, you know, compromise, yeah. Sorry.
Yeah. I was going to say also with the launch of AlloCare, 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, the transplant center also calling them when they leave the transplant center. We also have now a way of connecting patients through AlloCare as well, our digital patient app. It's all part of the plan to continue this sort of interaction with the patient.
Yep. Yeah. That makes a lot of sense. Maybe I can squeeze one last in, one more in for Mike. Given RemoTraC 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.
Yeah, Steven. Obviously, this quarter and third quarter, we recovered really nicely on our gross margins back to where they were in the first quarter. We sort of got over that RemoTraC hump already. That increase, that improvement in Q3 was down to the volume coming into the lab. I think as we look going out, as the volume continues to increase, that's going to naturally drive improvement in the margins. Also we've got a lot of efficiency and optimization projects happening in the lab at the moment. They'll drive that.
Of course, on the top line, we've mentioned this before, as we get additional reimbursement and whether that's for AlloSure Heart or we get private payer reimbursement start coming through for AlloSure Kidney, as we drive the increase in average reimbursement, that's also going to drop down to the gross margin and the improvement. I think we're feeling really comfortable that we can get to 75% gross margins.
We have a question from Alex Nowak, Craig-Hallum Capital Group. Please go ahead, sir.
Greg, 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've mentioned how this is a culmination of all your investments. You have RemoTraC, more patient care managers out there, the focus on protocols. You also have just the general push to go to local biopsy. 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?
Yeah, I think the most interesting investment we made is the patient care managers. We continue our DTP strategy. I think it's really important for us as we build that connectivity, not only within the patient, within the transplant center, but moving out back into community as that sort of last mile. I think what we've seen is typically during COVID, is the response to COVID, the response to RemoTraC has been amazing and typically they're offering their life. I think now we're adding additional things as part of that suite to continue that relationship. It's building that relationship with the patient. Clearly that all starts with the patient care managers where you offer this premium white glove service.
Got it. 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 to come?
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 three months.
Okay. Got it. 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? 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 transplants in five years?
That's a great question, Alex. 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 demand is actually met, right? If you're thinking about for every transplant that we do, there are five more that we could do if we had enough organs. 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. Doubling of the organs within five years, I think that is a stated goal. We probably had a bit of a curveball with COVID-19, we see transplant centers already back to full swing, and many transplant centers are actually above the previous year.
I have no doubt that there is a lot of opportunity that we can do. The most important element is that, number one, people go and donate organs. Number two is that these OPOs, these organ procurement organizations, are efficient and effective. I think there's a lot of room to grow in the future.
That's great. Just last question from me. It looks like we're entering what would be called the third wave here in the U.S. for the COVID cases. With everyone's eyes and ears at CareDx focused on the transplant centers, what are you hearing about another wave regarding transplant volumes? Are they foreseeing more shutdowns or slowdowns like there were in May, or do they know how to better manage the virus now that transplants will continue?
Yeah, thanks, Alex. What we're seeing is a region-by-region, center-by-center response, and there's even some variability within locations. 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 want. I think in response to COVID, RemoTraC continues to be an offering where we have seen continual increase in more than 150 transplant centers today. 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 the core has been covered. Maybe I'll take it a little bit of a different direction into the
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 for particularly AlloSure cfDNA as you try to maybe move more into that European market in the post-transplantation space?
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 approach. I think that will be something we'll see more of advanced. I think we've built a best-in-class virtual marketing capability, which has been recognized by many of our peers as well. I think that's from the typing business, ex-U.S. I think in terms of cell-free DNA, we continue to have strong interest and I think this is an area where we continue to work with our payers into U.S. The benefit of having some direct infrastructure, particularly in Europe, has enabled us to do that.
The other thing is we have many of our other folks who are key family leaders and supporters of ours who have actually been talking to their colleagues in Europe as well to make sure that there's this continuation of that information flow as well as why there's so much excitement about AlloSure, and now translating ex-US and AlloSeq, cell-free DNA.
Okay, great. That's helpful. I know it was sort of brought up in a question already, but just as we think about KidneyCare, sorry about that. As we think about KidneyCare, is there anything that you take away from the conversations you've had, whether with potential customers or anywhere through the pipeline around HeartCare that have changed how you think about the potential for that product longer term?
Yeah, absolutely. I was about to lead into that because I think what HeartCare's been able to demonstrate is, something 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 we look at the combination of the multimodality approach, it's really important. In terms of HeartCare, though, that was the first approved [Trimoldex] demonstration. For us, it really validates, A, our approach, but B, showing that we can indeed be a trailblazer. One thing that's never lost in CareDx is drive for innovation, something that we do every day, and it's at the front of what we want to do as a company. In that sense, translating that to KidneyCare, we've taken the same approach.
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, something that we believe will make a meaningful difference. In addition, we've also got UroMap and HistoMap as some additional offerings that we're working on as well. Again, this KidneyCare multimodality is really the foundational basis of the future in transplant.
Okay, great. 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&A landscape, just any comment on sort of what you're seeing out there as 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.
Yeah, I mean, the thing with the equity raise, it got us to be at a ratio similar to our peers, at least to the median. That's the first point 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. There are multiple opportunities over the last few years that we continue to monitor and be in discussion with. It's something that is part of our normal course, but we believe that there are meant 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. Congratulations to both Peter and Reg. 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 rejection monitoring in the first year and then following the first year.
I would think of AlloSure Lung as similar size to heart. There are about 3,000 patients in terms of that opportunity. With lung transplant patients, this is sort of one of the highest mortality conditions. With that, there actually is a lot more testing in the first year. I think with the protocol frequency that we're sort of establishing is originally initially the seven four four, we believe that maybe with some of the feedback we're getting, that there's a need to continue this maybe even higher surveillance as we look at that.
Yeah. 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 five-year survival. In terms of the tail, this is not as a big opportunity, but it's very exciting because the unmet need is so significant. The publications that Reg was talking about, we have now three major publications on cell-free DNA or AlloSure in lung, which is very exciting. I think here we benefit of taking the existing platform, go into this field, which is very adjacent, and might be able to quickly accelerate on lung.
Great. That's helpful. In 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 diagnostic products and are recognized as such. I think we are very comfortable with the current approach to MolDX, which is a data-driven approach, and getting through reimbursement through MolDX and then Noridian. We're constantly evaluating other routes. Maybe going dual track one day might be an opportunity with a combination between the FDA and a central office approach. Right now, I think, the HeartCare reimbursement is really a poster child on how we have thought through combining our multimodality offerings, and we're very comfortable with the current approach.
Got you. Great. Maybe a couple of quick ones for Mike. What was the AlloCell revenue contribution this quarter? Would you be able to split the report volume for AlloMap Heart versus AlloSure Kidney this quarter or for, I guess, year-to-date?
Well, first of all, on AlloCell, similar to the previous quarter, it's a bit less than $100,000. Still early days yet for AlloCell. 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. Yeah, the volume was 21,800 for the quarter, which was fantastic growth, no, we're not splitting that out.
Okay. Sounds great. Thank you so much.
Thank you.
As a reminder, if you wish to ask a question, press star one on your touchtone telephone. That's star one. We have a question from Yi Chen, H.C. Wainwright. Please go ahead.
Thank you for taking my question. 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 RemoTraC?
Yeah. Both have been significant levers for us. I think, the hallmark of our growth has been with the driving the protocols. We're at more than 50 protocols, continue to grow each quarter. It's such a signal opportunity for us as each center develops an AlloSure specific cell-free DNA protocol.
Maybe to add to this, Yi Chen, we are so early still that there's new patients coming onto the platform all the time. We're right now, depending on how you look at it, 5%-10% penetrated. The growth is primarily still driven by new patients coming onto the platform, while at the same time, Reg was mentioning with our patient care managers, we might edge up on the compliance rate and the adherence. 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 three quarters. Do you expect that trend to continue?
I think that will continue, Yi. Having said that, we will still be continuing to invest in sales and marketing. 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. 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, and 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 discussions. 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.