Biodesix Inc Stock

Thank you. Good day and thank you for standing by. Welcome to the Biodesics Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Chris Brinzey. Please go ahead.

Thank you, operator, and good afternoon, everyone. Today, Biodesics released results from the second quarter of 2026. Leading the call today will be Scott Hutton, Chief Executive Officer. joined by Robin Harper-Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the investor relations section of the company's website at biodesics.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance, and results to differ materially from those contained in the forward-looking statements. statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.

I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?.

Thank you, Chris, and thank you all for joining today. I'm proud to share that the Biodesics team delivered another quarter of strong growth, expanding margins, and improving operating leverage, reflecting the strength of our commercial strategy as we continue to progress towards profitability. In the second quarter, total revenue was $26.9 million, representing 34% growth year-over-year, accompanied by strong operating discipline and execution. Thank you. Starting with our diagnostic testing business, revenue grew 42%, driven by accelerating test volume growth and improved ASPs over the second quarter of 2025. Total test volumes grew 38% year-over-year due to increased adoption from both primary care and pulmonology, which grew 133% and 31% over the prior year, respectively. We're pleased with the growth from both primary care and pulmonology, not only from new physicians beginning to order the Notify CDT and Notify XL2 test, but from increases in the number of patients tested from existing accounts. As a reminder, since the second quarter of last year, we've been ramping our efforts in the primary care market to address the approximately 50% of nodules that are managed by general practitioners.

We've seen strong demand for notified testing in patients with smaller lung nodules. This population carries an inherently low risk of malignancy. But early detection of cancers significantly improves patient outcomes. Demand accelerated through the quarter following publication in March of the largest lung nodule biomarker validation study to date, which demonstrated that NotifyCDT can detect cancer in nodules as small as 4 millimeters while maintaining a low false positive rate. This clinical evidence drove a significant increase in notified CDT orders in smaller nodules during the quarter. Importantly, adoption within this patient population is also expanding utilization across the broader lung nodule continuum. Healthcare providers who begin ordering Notify CDT for smaller nodules subsequently increase their use of both Notify CDT and Notify XL2 for patients with larger nodules.

We are seeing this pattern consistently across customer segments, including both primary care and pulmonology. In addition to the publication at the end of the first quarter, we continue to present and publish clinical data for our on-market test. In May, at the American Thoracic Society, or ATS, annual meeting, real-world clinical and economic data was presented, including an independent study showing an increase in stage 1 lung cancer detection after the implementation of a lung nodule program using notified lung testing systematically to guide clinical decisions. Two others highlighted the role of notified lung testing to overcome limitations with PET scans for nodule evaluation. Presentations at ATS continue to highlight the real-world clinical value and economic advantages of lung nodule management programs that use notified lung testing for risk stratification. This growing body of clinical evidence is driving deeper account penetration and increasing test utilization. The result is continued commercial expansion of the Notify franchise and further validation of its role in addressing the significant unmet clinical need.

As we are growing our top line, our team's ongoing operational focus continues to yield improvements in gross margin and operational leverage. We delivered our fifth consecutive quarter of gross margins at or above 80%. Our total revenue grew 34% and operating expenses, excluding direct costs, only grew 7%, which included the expansion of our commercial team. With that, let me now turn it over to Robin to review our financial performance. Robin?.

Thanks Scott and good afternoon everyone. Total revenue for the second quarter was 26.9 million representing a 34% increase over the prior year period. Diagnostic testing revenue was $25.4 million, an increase of 42% year over year. The increase in diagnostic testing revenue was driven by growth in test volumes and higher average revenue per test. The class volumes were approximately 20,900, an increase of 38% year over year, supported by an average of 104 sales representatives in the field in the quarter. And we plan to continue our commercial expansion and end the year with approximately 120 sales representatives in the field. Salesforce productivity continues to improve across the entire sales organization, with newer representatives advancing along expected productivity curves, while more tenured reps continue to expand their contribution.

Improvements in average revenue per test over the prior year were primarily driven by additional payer coverage and improvements to revenue cycle management, continuing the trend that began in the third quarter of 2025 rather than any one-time item. The difference The difference in average revenue per test versus the first quarter of 2026 was driven by the mix in test volumes between Notify CDT and Notify XL2, with average revenue per test for both Notify XL2 and Notify CDT improving over the prior quarter. Development services revenue for the second quarter was $1.5 million as compared to $2.1 million in the prior year period, reflecting timing of project completion and revenue recognition. We currently have approximately $8.5 million in contracted business and the demand for our services remains strong. As we have discussed previously, the timing of development services project execution and revenue recognition can shift between quarters. Gross margin for the second quarter was 82%, a 200 basis point improvement over the second quarter of 2025. Margin improvement and strength was driven by growth in lung diagnostic testing, improvements in average revenue per test versus the prior year, and decrease in average cost per test.

Operating expenses, excluding direct costs and expenses, were $27.4 million, an increase of 7% year-over-year, supporting the 34% revenue growth delivered during the quarter. The increase in operating expenses was driven by an 8% increase in sales, marketing, and general administrative expenses due to our planned commercial commercial organization expansion, partially offset by a 4% decrease in research and development costs in the quarter. The company expects continued operating leverage as our expanded sales team advances along the productivity curve and converts growing experience into sustained performance combined with our focus on operational leverage and efficiencies. Net loss for the quarter was $7.3 million, a 37% improvement compared to the prior year period. Adjusted EBITDA, which excludes non-cash and other one-time items, was a loss of $3.2 million, representing a 56% improvement over the second quarter of 2025. We ended the quarter with $30 million in unrestricted cash and cash equivalents, a 17% increase compared to the first quarter, which included $6.5 million of at-the-market net proceeds raised during the quarter. Excluding the ATM proceeds, net cash used in the quarter was $2.1 million versus cash use of $6.9 million in the second quarter of 2025, a 70% improvement over last year.

We believe current cash, expected growth in revenue, and ongoing operational leverage provide sufficient liquidity to execute our growth strategy. Looking ahead to the remainder of 2026, in addition to our planned headcount expansion, we expect sales productivity to continue to improve as our sales team gain experience and tenure and our team continues their cross-discipline operational focus. As a result, we expect continued progress towards sustained adjusted EBITDA profitability and we remain confident maintaining our previously raised full-year revenue outlook of $108 million to $114 million. With that, I'll turn it back to Scott for some closing thoughts before we begin the Q&A.

Thank you, Robin. Each year, August 1st marks World Lung Cancer Day. It is a day of importance for the biodesign team to help raise awareness of the world's deadliest cancer and to expand society's understanding of the prevention, early detection, and treatment of this terrible disease that kills almost as many people annually as breast, colon, and prostate cancers combined. With the broadest portfolio of tests targeting lung disease and the largest lung-focused commercial team, it is our mission to transform patient care and improve outcomes through personalized diagnostics. We see significant opportunities to impact many more patients as clinical adoption expands, as our additional clinical and economic evidence reinforces the value of biodiesel tests, and as our commercial organization continues to mature. remain focused on executing with discipline, improving capital efficiency, and delivering meaningful value to patients, providers, partners, and shareholders. In closing, I want to thank the entire Biodesics team for their continued focus, discipline, and commitment to our mission and culture. Let's now move to questions. Operator, you may start the Q&A session.

Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To Stand by while we compile the Q&A roster. Our first question today is from Kyle Mikeson with Canaccord Genuity. Your line is open.

Hi, this is Alex D. Kaysen. I'm live for Kyle Nixon. Thank you for taking our questions. And congratulations again on the quarter. So it was great to continue to try to diagnose just you noted a few different things here. So you benefited from that recent publication supporting the utility of modified testing with small nodules and also healthcare professionals ordering NotifyCDT for small nodules, subsequently increasing their ordering of NotifyCDT and XL2 for larger nodules as well. So my question here is, here is, do you believe this could remain a relatively meaningful test volume growth driver in the near term and potentially medium term? Thanks.

Hi, Alex. Great question. Yes, we do. We think post-publication what we've seen here is kind of the new trend and trajectory. You know, the one thing that we know is that early detection and diagnosis matters. That was where that interest in the smaller nodules really originated. And we've seen great traction both for new customers.

customers and existing customers and adopting both. Thank you. And one more for me. So we're seeing some signs of recovery in biopharma and biotech. Has this translated to additional contracted revenue and new deal flow coming in for you? Thanks. Thank you.

Yes, great question, Alex. You know, ASCO is really the largest meeting where you have an opportunity to sit with the major pharmaceutical companies. We noted that we had a strong ASCO this year, and we've continued to see great interest. As the team continues to formalize those agreements and sign those agreements, agreements. We'll give updates, but we feel confident that that pipeline will continue to be robust for quite some time.

Got it, thank you. And one last one from me. So you know there was cause improvement during the quarter. Could you just elaborate on that a bit? Are these efforts largely ongoing and we could see continued meaningful improvement or has the lion's share of the benefits already kind of been realized there?.

Yes, great question. Thank you. We are constantly working on operational improvements, trying to increase our efficiency and efficacy. But with gross margins already above 80%, it's hard to drive it too much higher, but we are continuously working to strengthen our already best in class margins. So I don't expect huge increases, which is why we were reiterating margins margin guide right around 80 or just above 80. Thank you very much.

Thank you. Our next question is from Thomas Flatton with Lake Street Capital Markets. Your line is open.

Good afternoon, guys. Congrats on that great quarter. Just on the sales team dynamics, you guys added maybe a couple of heads fewer than I was expecting, but it seems like you're going to ramp hiring in the second half of the year. Can you just walk us through some of those dynamics, including how you're splitting it between pulmonology and PCP? Sure.

Yes, great question, Thomas. You're spot on. We're approximately too short of maybe what you would have modeled. Most of that is just timing. As you know, when we share total rep count, it really is based upon them being hired, completing their training, and being actively in the field and positively contributing. So, we're continuously recruiting and bringing on the best best team members that we possibly can. You know, we haven't given great clarity on the split between primary care and pulmonology-focused sales reps to date because we're going to hire opportunistically. And again, some of that is based upon the progress we make in pulmonology and then those pulmonologists subsequently introducing notified testing into their referral network and those primary care physicians.

So as that scales, then opportunistically we'll bring in somebody to support the primary care call point. To date this year, the majority of those new hires have been primary care focused.

Got it. And then looking ahead to the balance of the year, anything we should be expecting relative to more publications and then importantly, any news from the development pipeline?.

Yes, great question. We're always focused on data development. We think that's critically important as we continue to build this market. We have a number of papers that we have submitted. And so until they're actually accepted and published, we can't really share much on that. So we'll be giving news there. You know, the CHEST meeting, which is the annual American College of Chest Physicians Society meeting occurs every year at the end of October, beginning of November. We usually target that for posters, presentations, and publications also.

So more to come as we receive notice on those publications and presentations. But you definitely should be expecting more. We're very excited about our clinical efforts. Last year, we really highlighted the progress we'd made with Clarify. Couple of things have been submitted out of Clarify, so we're eager to start sharing that data. But more to come there. On the R&D side, you may recall last year around the AMP meeting we did a development partner and R&D update. We plan on doing another one of those this year, so in the November timeframe.

We're eager to share some of the progress we've made. We think that we've made meaningful progress that will positively impact that pipeline and future revenue streams in years to come.

And if you could just help me, Scott or Robin, with some quick math. I know you said that PCP volumes grew 133%, but approximately what percent of your total testing volume now comes from PCP? I think it was 15% last quarter.

Yes, it's very consistent with last quarter, right around that 15%. Thanks, Thomas.

Our next question is from William Bonello with Craig Holland Capital Group. Your line is open.

Hey, guys. Thanks for taking my call here. So it's been your strategy, which seemed really prudent to us, and the market seems to be appreciating to grow at sort of a responsible pace, I think. is probably how you'd describe it, Scott, and being sure that you're able to drive leverage from your top line growth, not getting out too far over your skis. I'm just wondering if your opinion on that changes at all in light of a couple of things. One, the really positive response that you are seeing from the paper that was published in the spring, and two, the response that you're seeing from your PCP efforts.

Yes, Bill, it's a great question. We continually assess what it may look like to opportunistically expand the sales force more rapidly, but you nailed it. We're very cost conscious, we're mindful of where we are on that path to profitability. We think that's critically important and have noted that there's not an abundance of diagnostic companies that have gotten to profitability and then stayed there. We think that's important not only for investors and shareholders, but also our team. So yes, we're going to continue to be mindful about when and where we spend money. We want to ensure that we've got great line of sight to an immediate return on that investment.

And so we'll maintain that six to eight hiring cadence per quarter and currently estimating that we'll end the year right around 120 sales professionals. Okay.

Okay, that's really helpful. And then you're probably tired of getting this question every year, but, you know, as long as around the corner, any updated thoughts on activities?.

around guidelines? Yes, Bill, it's a really good question. You know, we never get tired of that question because we think it's important that we talk about it. For those that may not understand what Bill was referencing, the ACCP or the American College of Chest Physicians have not updated their relevant guidelines in over 12 years. And so, as we all know, there have been significant advances in almost all avenues of healthcare and medicine. So there is not currently any reference to blood-based... biomarkers and so we feel that we've built a really strong data package. We think it's compelling and so we'll continue to publish, present that data in hopes that when they update that we have a favorable response. CHEST went on record two years ago.

They acknowledged they were behind. They stated that they had assigned a team to update those. The last CHEST meeting passed, and they said that they had moved their target to updating those guidelines this year, being 2026. So, to your point, Bill, as we head into to October, and we all fly to Phoenix this year for that meeting. We'll be eager to see what updates they provide.

Okay, thanks. And then just one last one that's sort of a two-parter, but the PCP test growth is obviously really strong. Just curious, you know, sort of what you're seeing on the PCP front, how that growth is kind of breaking. out between adding new providers and providers ordering more tests. And then along with that, I know you've been doing some of these special seminars around you know, nodule clinics and management programs and whatnot. And I'm just wondering if those are continuing to happen and, you know, how they're going.

Yes, Bill, we see strong momentum and growth kind of in new ordering physicians in primary care, and then those that began ordering a few months ago, we see them continue to increase and improve. So, it's a nice balanced approach across both. And you highlighted it, you know, we've got that first mover status, we take that both as a privilege and an honor that we're out there educating, training and building this market. We highlighted the lack of updates to the guidelines. We also have noted that pulmonologists don't have a long track record with biomarkers. And so what you're referencing is educational events that we may sponsor or host. Our whole goal there is to put physicians in front of physicians so that there's peer to peer experience sharing, knowledge sharing, and we think that that's a responsible way to help build this market and we'll continue to do so.

You know, when we do those programs, We definitely see a number of physicians leave that, having a better understanding of how nodule management tools like Notify Lung can help positively impact early detection and diagnosis, hopefully increasing the likelihood of an earlier diagnosis, which we know leads to a higher likelihood of a positive outcome.

Excellent. Thanks a lot. Thanks, Bill. Thank you very much.

Our next question is from Max Masucci with Ross Capital Partners.

Your line is open. Hi. Good afternoon. Nice quarter. Great to see the momentum in the core business. So first half, 38% year-over-year growth in revenue. If you look at the full year range, it implies second half growth, like around 16% at the midpoint, 22% at the high end. So I know you're comping up against a much stronger second half, but it would be great to understand just about the approach you're taking with guidance. Biden's just a nice multi-year growth acceleration with, you know, continuing to, you know, set achievable targets. So, you know, more simply, you know, what has to go right to land above the implied range in the second half?.

Yes, thanks, Max. You know, our outlook is based on continued growth of our commercial team and improved sales rep productivity, especially those hired in the second half of 2025 as they gain tenure and experience in the field. We want to demonstrate continued ASP stability from payers, and we fully expect that. and the anticipated volume growth across both pulmonology and primary care. We've already referenced that there will be new evidence generation, we'll continue to share that. We think these factors are in our control, they're repeatable and sustainable in 2026, and we're excited to go out and demonstrate that. The one thing that we have seen over time is that that biopharma services, those partnerships, that there can be a seasonality and a lumpiness to those. And we want to be mindful of setting ourselves up for success. Okay.

And Max, you're exactly right. The comps, there's a pretty strong step up in the second half of 2025. So the comps get a little bit closer, decreasing that year-over-year estimated growth. And just as a reminder, we did have about $1 million from back pay collections. in that time period as well. So if you extract that, then the year-over-year growth looks a little closer to the first half.

Yep, that absolutely makes sense. So second one, I mean, fourth straight quarter of accelerating test volume growth. Also, you know, very... very strong sequential growth off of Q1, a bit above the normal Q2 step up that we see. So just curious how much of the growth acceleration can be attributed to the expanded PCP targeting versus other factors like know, rising productivity across the, you know, the broader sales force. And then final one, just any catch up from in Q2 from the weather disruption last quarter?.

Yes, you know, great question. Maybe I'll take that in reverse order. We highlighted last quarter that we did not see a significant or material weather impact. We saw minor impacts, but over time, you know, for us, with our really rapid turnaround times, We track the traceability of those orders coming in, and we haven't seen an impact. So, we had a strong quarter last quarter on that front, and we hope to continue to do so. Robin, anything you would add on that? Yes, I think the timing of the weather in the first quarter was misaligned.

of the quarter such that we had time to catch up inter-quarter. So that was good. We didn't have anything roll into the next one.

Got it. That's it for me. Thanks. Thanks, Max.

Thank you. Our next question comes from Yi Chen with HC Winwright and Company. Your line is open.

Thank you for taking my questions. So with operating expenses increasing just 7 percent, how are you balancing the accelerated commercial investment and also the pipeline development against the objective of sustained profitability, and what level of expense growth is embedded in the second half?.

can have of this year. Thank you for your question. We are very pleased with the leverage the leverage we're gaining. We've built a strong infrastructure and team internally here that can help support that accelerating revenue growth without having to grow our expenses at the same level. Our number one priority is growing top line revenue. Our number two priority is getting to profitability, as you mentioned. So we are very, very focused on maintaining expenses and growing the internal infrastructure only as needed. We anticipate that we'll see pretty steady operating expense. from where we are now across the rest of the year with moderate step ups due to the increase in the commercial team.

And we're working diligently with our partners in a cost effective manner to advance our pipeline products without having to do massive investments to get the data that you've been seeing over the last couple of quarters on those pipeline products and to keep advancing that towards commercialization.

Got it. Thank you. Thank you, Lee. Thank you.

I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biodesix First Quarter 2026 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the call over to Chris Brinzey, Investor Relations. You may begin.

Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the first quarter of 2026.

Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer.

An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast.

In addition, we will discuss non-GAAP financial measures on this call. Description of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.

I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris, and thank you all for joining today. Biodesix delivered an exceptional start to 2026 with first quarter results that demonstrate continued momentum across our commercial, operational and strategic priorities. Revenue growth accelerated, margins expanded, and we continued to demonstrate operating leverage as we progress towards profitability.

As a reminder, our focus in 2026 centers on 3 objectives: driving top line growth, improving operational efficiency and leverage and advancing our pipeline to support long-term expansion. In the first quarter, we made meaningful progress across all 3 objectives. Total revenue for the quarter was $25.6 million, representing 42% growth year-over-year, accompanied by strong operating discipline and execution.

Starting with our Diagnostic Testing business, revenue grew 37%, driven by accelerating test volume growth and improved ASPs over the first quarter of 2025. Total test volumes grew 29% year-over-year due to increased adoption from both pulmonology and primary care, with test volumes from primary care now representing 15% of total tests delivered in the quarter.

In support of both health care provider and payer adoption, we continue to present and publish clinical data for our on-market test. Specifically, Nodify Lung testing, which is used by pulmonologists and primary care providers to triage patients by risk of lung cancer, helping determine who needs intervention versus surveillance and allowing higher-risk patients to be prioritized for prompt follow-up.

In February, we announced the publication of the largest lung nodule biomarker clinical validation study that included over 1,100 patients, leveraging our ongoing real-world evidence study, CLARIFY. The study demonstrated consistently strong Nodify CDT test performance with high specificity or low false positive rates regardless of nodule size or other patient risk factors.

Recent data on patients without biomarker testing reported that 40% of malignant nodules had progressed in tumor size between the time of the first detection and the time of initiation of definitive treatment, underscoring the urgent clinical need for tests like Nodify Lung to expedite diagnosis and enable earlier intervention when outcomes are most favorable for the patient.

Turning to Development Services, revenue in the quarter nearly doubled year-over-year. This reflects execution on contracted programs as well as continued success securing new agreements, reinforcing the strength and differentiation of our development platform. The depth and breadth of our offering was recently highlighted with several presentations at AACR in April.

It is especially exciting to see our multi-omic technologies combined with advanced data informatics, translating into meaningful clinical impact on our pipeline product concepts and fueling strong interest in our Development Services offering.

Additional data on our pipeline products, including our genomic and proteomic MRD and ROR test, the VeriStrat test clinical utility in prostate cancer and our new AI-based digital diagnostic test will be shared at upcoming conferences and events throughout the course of the year.

Gross margin for the quarter was 84% on a GAAP basis and 82% excluding a onetime sales and use tax recovery, representing a 300 basis point improvement year-over-year. Margin expansion continues to be driven by scale in Diagnostic Testing, improved pricing realization and ongoing workflow optimization in the laboratory, resulting in decreasing cost per test. We are encouraged by the consistency of these trends and strong revenue growth and operating leverage and believe they reinforce the scalability of our model.

As a result of the performance across both Diagnostic Testing and Development Services in Q1 and our continued progress towards profitability, we are raising our full year 2026 revenue outlook.

With that, let me turn it over to Robin to review our financial performance. Robin?

Thanks, Scott, and good afternoon, everyone. Total revenue for the first quarter was $25.6 million, representing a 42% increase over the prior year period. Diagnostic Testing revenue was $22.3 million, an increase of 37% year-over-year. The increase in lung diagnostics revenue was driven by growth in test volumes and high average revenue per test. Test volumes were approximately 17,800, an increase of 29% year-over-year, supported by an average of 100 sales representatives in the field in the quarter, and we expect to continue our commercial expansion as described in prior calls at a cadence of about 6 representatives per quarter through 2026.

Improvements in average revenue per test over the prior year were primarily driven by additional payer coverage and improvements to revenue cycle management, continuing the trend that began in the third quarter of 2025. We believe recent improvements in average revenue per test reflect durable changes in payer coverage and revenue cycle execution rather than discrete or onetime effects.

Development Services revenue for the first quarter was $3.3 million, an increase of 99% year-over-year, driven by delivery against our contracted programs and the addition of new Development Services agreements. We finished the quarter with approximately $10.4 million in contracted business following accelerated revenue conversion velocity in the quarter.

We continue to see strong demand and visibility across our Development Services pipeline and do not expect the timing of these completions to impact our full year expectations. Gross margin for the first quarter was 84%, which included a onetime recovery of $0.4 million related to previously paid sales and use taxes. Excluding the onetime recovery, gross margins were 82%, representing a 300 basis point improvement over the prior year period.

Year-over-year margin expansion was driven by growth in lung diagnostic testing, improvements in average revenue per test and decrease in average cost per test. Gross margins continue to reflect Biodesix's strong operational efficiency and execution. Operating expenses, excluding direct costs and expenses, were $27.6 million, an increase of 18% year-over-year, supporting the 42% revenue growth delivered during the quarter. The increase in operating expenses is driven by a 19% increase in sales, marketing and general and administrative expenses due to our planned commercial organization expansion.

The company expects continued operating leverage as our expanded sales team advances along the productivity curve and converts growing experience into sustained performance. R&D expense for the quarter was $3.3 million, representing a 14% increase over the prior year period. R&D investment reflects continued clinical studies supporting adoption of our lung diagnostic tests and progress across our pipeline. Net loss for the quarter was $7.8 million, a 30% improvement compared to the prior year period. Adjusted EBITDA, which excludes noncash and other onetime items, was a loss of $4.1 million, representing a 35% improvement over the first quarter of 2025.

We also strengthened our balance sheet, ending the quarter with $25.6 million in unrestricted cash and cash equivalents, a 35% increase compared to the fourth quarter, providing solid runway to support our growth initiatives. The change in cash balance includes $16.8 million of at-the-market net proceeds raised during the quarter, partially offset by planned cash outflows that occur annually during the first quarter.

Looking ahead to the remainder of 2026 and in addition to our planned headcount expansion, we expect sales productivity to continue to improve as our various sales cohorts gain experience and tenure, which remains a key driver of operating leverage through 2026. Following the strong first quarter performance and improved visibility into demand and execution, we are raising our full year revenue guidance to $108 million to $114 million.

The increased midpoint represents 25% growth over 2025, which reflects the strength of the first quarter while remaining consistent with our full year planning assumptions. We also expect continued progress towards sustained adjusted EBITDA profitability, driven by increasing sales productivity, expanded clinical evidence supporting the Nodify Lung test, growth in the Development Services pipeline and demonstrated operating leverage.

With that, I'll turn it back to Scott for some closing thoughts before we begin the Q&A.

Thank you, Robin. In April, Biodesix was recognized as a Top Workplace for the third consecutive year. This recognition reflects who we are at our core, a team built on trust, collaboration, growth and shared ownership of results. Our culture here at Biodesix is not aspirational. It is operational. Our first quarter performance reflects that discipline and reinforces our confidence in the scalability and durability of our business model.

We continue to see significant opportunities ahead as adoption expands, clinical evidence grows and our commercial organization continues to mature. We remain focused on executing with discipline, improving capital efficiency and delivering meaningful value to patients, providers, partners and shareholders.

In closing, I want to thank the entire Biodesix team for their continued focus, discipline and commitment to our mission and culture.

Let's now move to questions. Operator, let's start the Q&A session.

[Operator Instructions] And our first question is from the line of Andrew Brackmann with William Blair.

I wanted to focus on the commercial team. I think you called out about 15% of volumes were coming from the primary care channel there. So clearly, something is working. So I guess as you sort of think about some of the learnings or successes in some territories that are driving a lot of that volume growth, how transferable are those to other territories? And I guess, where are we in the process of amplifying these learnings just sort of across the entire sales force?

Yes. Thanks, Andrew. Great question. It's been about 3 quarters since we brought on that first sales cohort focused on primary care physicians. So you nailed it. We continue to learn, but we had some immediate learnings that we've been able to apply. We had our National Sales Meeting at the end of February, which is a great opportunity for us to share best practices and to roll that out.

What we've learned is still that starting with the pulmonologists building a really strong relationship, allowing them to help us with introductions into their referral network really aids in a smooth transition. It allows the pulmonologists to track those patients through that referral process. And we're continuing to see that growth across the United States. We really started more in the Northeast when we first had our initial hires, and we're seeing that transition and progress more westward.

And so it has been transferable. We feel good about the progress we've made. And I think we knew with a high level of confidence based upon our early pilot experience that this was the right decision. And so we think this confirms that we've made the right decision. We've still got a lot of opportunity to grow. And I'll just remind everybody, what it really did was opened up the addressable market that was serviceable to us.

And so we knew that about 49% of those patients with incidentally found nodules are stuck in primary care. So we think that we've begun tapping into that. And we're really confident that over time what it will start to show is that we're getting to patients earlier. And we know in this scenario, earlier detection and diagnosis is going to lead to better outcomes.

Perfect. Appreciate all that color. And then just on the evidence front, Scott, you called out the publication of the validation study in February. Can you maybe just sort of talk about what that publication, what impact it's had on the field? And I think in particular, you sort of mentioned across that study, there's low false positives regardless of the nodule size. Are you seeing an increase in the use of Nodify in the smaller nodules? And I guess, how big of an opportunity is that for you in the grand scheme?

Yes. For us, it really is about data development. I think there's a continued opportunity for us to educate and empower pulmonologists and primary care physicians to utilize Nodify testing. So the more we can publish and present it gives us opportunities to put new data out in front of health care professionals, and that's what this did. You nailed it. We know that not only do physicians want to get to these patients earlier, but they want to be bolder than they've been in the past.

Something has to change because we haven't seen a significant change in screen detection over the last 10 to 15 years. And so we are seeing an increase in smaller nodules. But that goes hand-in-hand with the advent of robotic bronchoscopies where these interventional pulmonologists feel more confident that they can get to some of the smaller nodules that they wouldn't have been able to get to easily and successfully in the past.

And so we thought the time was right. We're excited to get that data out. And I would add that additionally whenever we see strong performance in a real-world environment, it really starts to show that these tests are durable, that our growth is sustainable and that we're going to continue to have a significant impact with the health care professionals that we serve.

Our next question comes from the line of Thomas Flaten with Lake Street.

Scott and Robin, just a question to follow up on the PCPs. I'm just curious what you're hearing anecdotally from the PCPs, their level of comfort at retaining these patients with this test result in hand. Do they feel comfortable with the referral networks? I get that having it come from the pulmonologist is probably helpful. But anything you can share on their experience that they've had? I know it's only been 3 quarters, but I'm just curious if there's anything you can share.

Yes. Thanks, Thomas. It's a great question. Speaking on behalf of that -- those health care professionals in the primary care setting, one of the things that we anticipated and we've confirmed is they've got an abundance of patients that are eligible for Nodify testing. They still have questions as to how to take those and interpret those test results and defining who they refer on versus who they keep to monitor or surveil.

And so what we've seen is through our brochures and materials, sharing of publications and data, they've become very comfortable with how those test results can better inform what they do with those patients, building that confidence. One of the things we have seen in primary care is they're very comfortable with Diagnostic Testing. It's what they do. They understand it. They have phlebotomy services on site. And so from a workflow kind of implementation, we've actually found primary care to be really accessible and receptive of Nodify testing.

So we're excited to continue to help educate them. One of the things that we really focus on is ensuring that when those patients are referred on that they stay in contact with that pulmonologist, right? That primary care physician will always be that patient's primary care physician. So they, over time, will gain additional confidence as they see what ends up happening for those patients. And hopefully, we're able to see a [ stage ] shift, and we're starting to see patients live longer, which will build even more confidence within the primary care community.

And then just sticking with this theme, you called out in a prior response that what are the PCPs going to do with the incidentally identified nodules, but you didn't mention the screening nodules. I'm curious what you're hearing from the PCPs and not necessarily that having a bit access to your test is going to help them get more patients into screening, but if they've shared anything anecdotal about pushing the high-risk patients into the screening programs, and by that, I mean, low-dose CT, and maybe more broadly, if you've seen any change in the trends there in number of patients getting pushed into that screening protocol?

Yes. It's been one of the challenges regardless of whether you talk to pulmonology or primary care physicians. 10 years ago, lung cancer screening compliance for those screen-eligible patients was low to mid-single digits. We've seen improvements in the last 5 to 10 years. But most of the reports out there will still state that it's less than 15% to 20% of the screen-eligible patient population.

So we've come a long way. We still have a significant room to grow and improve. One of the beauties of Nodify testing is our test works not only in incidentally found nodules, but also in screen detection. So as we see more support and compliance with screening programs, it will only increase this opportunity for us. So we have seen that a little bit but we're still not there. I do think the advent of blood-based screening test in lung cancer will help, and we think this will benefit Nodify testing and the Biodesix team.

Your next question comes from the line of John Wilkin with Craig-Hallum.

Just a couple of questions on the guide. Wondering if you can break out a little bit just in terms of how much is baked into the guidance for Development Services versus testing revenue. I know Q1 came in really strong. And just trying to get a sense of what you're expecting with that business for the remainder of the year.

Yes, absolutely. We're anticipating that the Development Services revenues for the full year remains consistent with where we had expected it to be. We had a little bit of a pull forward in the quarter. So we're able to recognize more revenue earlier in the year. So we expect the services business to remain consistent with those expectations. And the majority of the increase is included in the lung diagnostics revenues.

Perfect. That's super helpful. And then on the lung side, how much, if any, additional ASP expansion are you guys factoring in for the remainder of the year? And is that something that we should expect to see continued progress on? Or will -- is growth at least embedded in the guide more skewed towards the volume side?

Growth in the guide is absolutely weighted towards volume. We do anticipate that we'll see a little bit better ASP versus the first quarter. I anticipate somewhere like what we saw midyear last year, fourth quarter was skewed higher due to the onetime collections that we had in that quarter. So while we anticipate a little bit improvement in ASP, we're very pleased with where we are right now and the improvements made both through coverage contracting and revenue cycle management. So volumes should be the growth driver.

Your next question comes from the line of Kyle Mikson with Canaccord Genuity.

Congrats on the quarter. It looked like the -- I think that you did better on the pharma front this quarter. Could you maybe talk about the pipeline funnel there? And yes, I wanted to start there. Maybe like specifically what's -- like what's most attractive with your portfolio relative to maybe prior years that's helping you succeed on that front?

Yes, Kyle, great question. This was more of a kind of a cadence or timing scenario. We had a number of retrospective samples that came in earlier than we anticipated and forecasted. So we were able to pull a couple of those forward, those contracts. So we don't see it changing kind of what our long-term performance is. And just as a reminder, this has historically been about 8% to 10% of our total annual revenue.

We continue to see great progress and momentum within the Biopharma Services and Development Services front. And you may have noticed that we exited the quarter with $10.4 million in contracted dollars out there to be recognized over the coming months and quarters. We've stayed above that $10 million mark for quite some time now. So that gives us a lot of confidence about what the future looks like.

And it really isn't a shift or a change. This momentum has been building over the last few years. And it's really interest across our portfolio on the genomic side and the proteomic side, right, being a company that is focused on multi-omic solutions resonates with our Biopharma Services partners. And so our team continues to do a great job on that front. And we're excited about the rest of the year. We've got -- we just finished AACR, and we've got ASCO upcoming. And so those 2 meetings usually set us up for a strong second half.

Perfect. And then you had a great top line beat and your gross margin has been really solid in the past few quarters. Did you specify how you're going to reinvest those dollars, sales force, new products, new markets? Just how do you guys think about that? And then with respect to the EBITDA positivity going forward, how does that affect that kind of pathway?

Yes. We're obviously very pleased with the gross margins and the continued improvement that we've seen over the last several quarters. The team works very, very hard to not only improve our ASPs, but also gain real efficiencies and productivity improvements within our operations to drive down the average cost per test.

The dollars that are coming in through those gross margins go to support the business. And our main focus is our commercial expansion, growing the top line revenue and then getting to adjusted EBITDA -- sustained adjusted EBITDA positivity and cash flow positivity. So I guess the dollars really are going towards commercial. And we're still on track. We are executing to plan and on the path to profitability.

And then on that note, anything additional to like pipeline investment? Just because I feel like sales force is kind of an obvious one and you're going to be consistent with, I guess, several perhaps or almost double-digit reps per quarter, but anything on the pipeline maybe going forward, maybe partnerships perhaps that you can kind of accelerate with this extra funding?

Yes. Well, we hope so, right? We -- as we look towards the remainder of 2026, we think we've got great opportunities to highlight progress being made, investments and the return on those investments and hopefully, additional partnership and collaboration opportunities. We'll look forward to sharing those when we get there. But for us, it really is about control what we can control.

We worked long and hard to build what we believe is the strongest and best pulmonology-focused sales team in the market, and we want to continue to give them an opportunity to flex and demonstrate that we can continue to build this market. Last year, in the beginning of the fourth quarter, we had an R&D Day. We'll look forward to providing more on kind of our R&D and Development Services front in the second half. But anything that happens between now and then, we're going to share that broadly and celebrate it.

[Operator Instructions] Our next question comes from the line of Dan Brennan with TD Cowen.

Pradeep Ambrose on behalf of Dan Brennan. Can you quantify how much quarter 1 revenue was impacted by weather versus typical seasonality?

Yes, it's a great question. Like everybody else, particularly those in the areas of the country that were impacted by the series of storms, we were as well. It was a pretty significant impact to us in the late January, early February time frame as the FedEx hubs across the country were impacted. But we were very pleased with how the team responded and clearly finished the quarter strong to end with a nice strong beat for the quarter.

Okay. And with no further questions in queue, this does conclude today's conference call. You may now disconnect.

Good afternoon, everybody. I'm Luke Sergott. I cover life science tools and diagnostics here at Barclays. With me, it's my pleasure to have Robin Cowie, CFO of Biodesix. Thanks again for making it. And sorry for being a little bit late here. We had a little bit of break so we can run over.

But I guess let's start off, relatively unfamiliar with the business, outside of meeting you guys a couple of times and scaling up. So for those that aren't familiar with what you guys do, kind of walk us through just the 101 of where the technology, what the platform is and how you're building it and like kind of where you guys are going?

Yes, sure, absolutely. So Biodesix is a diagnostics company. We're dedicated to developing tests to help improve patients' lives and outcomes, focusing on specific clinical questions. Commercially, we're primarily focused in the area of lung. But on the research and development and on the services side, we actually are pan-cancer and pan-disease, so providing research services across the board.

We have five tests on market in lung, all with Medicare coverage. Two are tests to help identify which patients are likely malignant and likely have lung cancer and need to move on to a biopsy or a surgery and those that can safely go on to CT surveillance. And then we have three tests that help identify the appropriate treatment for patients once they've been diagnosed with lung cancer.

We leverage genomics, proteomics and radiomics AI to help accomplish that on our commercial front and then also on the services side, where we'll provide discovery of tests for pharma companies or diagnostic companies, development, regulatory, reimbursement support, all the way up through commercialization.

Okay. And on the -- so if I get the workflow, right, so somebody comes in with -- like how are they -- when is the test used in the workflow? Like when does the patient come in, where do you guys fit within that? And then obviously, you have from the diagnosis, risk stratification and then you go to the therapy selection, but where -- kind of where is your sales point? Is it on the physician? Is it on the oncologists? Like just give us a sense of where they fit.

Yes, we actually call on pulmonologists and just this past year began leveraging those relationships to begin calling on their primary care referral network. There's about 15,000 pulmonologists out there treating patients and about 15,000 primary care physicians that actually deal with the vast majority of lung nodules that are diagnosed each year. And it's estimated in the U.S., there's about 6 million patients annually with a lung nodule. Some of those are found through screening process...

I was just going to ask how do you find out you have a lung nodule? [indiscernible] my lungs are hurting me today.

Yes. Most of the time, it's incidental. So somebody goes in, they hurt their shoulder, they go in for a heart test or they have something else and they see a spot on the lung, and it that gets identified and referred either to pulmonology or to primary care for follow-up. The lung cancer screening adoption is very, very poor in the United States. So it's really -- it's incidental. And so you not only then have to deal with whatever brought you to the hospital in the first place, but then also following up on the lung nodule to make sure that it's not cancer.

So that's where our test gets ordered, it's after the lung nodule is found, and we can help them determine if it's high risk and they need a biopsy or surgery or if it can be safely followed through CT surveillance. And then after -- and all of our tests are blood tests. So very easy and convenient for both the patient and the physician.

And from I guess on -- we'll get into the test development and how this shapes into your overall platform going forward. But from a technology perspective, you say genomics, proteomics and radiomics, like how did you guys come out and bring this all together? And if you can give us from -- is there a difference between your Nodify Lung, right, that's like the risk characterization and then you have your IQLung, which is your therapy selection, right? Are there any differences there in the technologies?

Yes, absolutely. So for Nodify, those are proteomic tests. So we use ELISA and LC-MS to measure proteins and autoantibodies in the blood. And then in the treatment guidance side, we use ddPCR for our very targeted panel of gene mutation testing. And then we use the Thermo NGS platform for our NGS test. And then finally, another proteomic test, VeriStrat, which measures the patient's immune system. We can actually measure when the body has triggered an acute chronic inflammatory response, which is where the immune system is actually helping the tumor instead of fighting it. And that's a MALDI-ToF mass spec.

Okay. That's really interesting. So talk about the reimbursement and the path here. And I just feel like the reason I thought all that was very interesting because like when you think about blood test, you always think about like NGS, right? And so you've been in the market for a while. And the reason I asked about reimbursement, it takes a while to get that. So are you planning to incorporate more multiomics in the next versions of your tests?

Yes, we do. We think there's no single technology that can answer every clinical question. And so for us, it's really important to use the technology that can best answer the clinical need. So the incorporation of radiomics into our pipeline, we're an expert in clinical proteomics. It's one thing to be able to measure proteins, it's another thing to be able to do it routinely and at margins that are scalable. Last year, our gross margins were 81% for the year. So we've excelled at optimizing this testing platform.

And from a reimbursement standpoint, you're right, reimbursement is long and hard. And it's really important to continue to publish, get great clinical data and clinical utility to show how you impact care. In lung, about 60% of the patients are Medicare. It's a predominantly older disease. And we've got that down for our tests, and we've started to gain good momentum in the commercial payers for Nodify as we saw really strong increases in ASPs over the last 4 quarters.

How much coverage do you need more from the commercial side?

I'd like all of it.

Yes, I know. I mean...

We're in great shape now. We're at 81% gross margins now. And so now everything on top of it is just beneficial and flows through to the rest of the business.

Yes. It was more of a question like from a mix perspective, how much is not being reimbursed versus on your volume side?

It's a relatively small and shrinking percentage.

Okay. Fair enough. Fair enough. And then on the IQ side, as therapy selection, we talked about kind of this flywheel and you talked about the flywheel of like pharma accessing the data and working with you and you're going to get more companion diagnostics and informing better treatment decisions. Talk about that funnel and how that pipeline is building for you guys. And is this something that's scalable just on the IQLung? Or do you need to have like another test outside of that?

Yes. The majority of our testing on the biopharma services side is on IQLung, but we do a variety of other services. So we'll discover new tests for a company, we'll bring on new tests if they have early data on a different test and take it to a scalable, commercializable testing platform. We've announced last fall a partnership with Bio-Rad, where we developed an ESR1 test for breast cancer for them for the ddPCR platform, and had that from contract to LDT in about 4 months. So very rapid, very scalable. And the demand for our services is increasing. So our backlog is higher than we've ever seen it before, and the interest in what we're doing is continuing to grow.

Okay. And then how does that play in from -- as you're thinking about spend, investing in the business for growth versus investing for the next 10 years? Like how do you weigh that and like give us your near-term and longer-term priorities?

Our near-term priorities are growing the commercial organization and growing top line revenues to get to cash flow positivity. We did reach adjusted EBITDA positivity in the fourth quarter last year. So we're very happy to hit that milestone. And now it's continuing to move towards sustainable adjusted EBITDA and cash flow positivity. So that's our primary goal.

The great part about the services side of the business is we use all the same equipment that we use for our commercial. So we're leveraging all of the equipment and the personnel. So it's really great operating leverage. And the larger that business grows, the more it pays for itself.

So we do have several tests in our pipeline. A MRD -- combination MRD and proteomic test that we're developing with Memorial Sloan Kettering Cancer Center as well as VeriStrat in other tumor types. So we've actually studied VeriStrat in nine different tumor types, and we presented new data last year in prostate and some other tumor types to -- working to expand that and then working on digital diagnostics. So using imaging as the input instead of wet lab as the algorithmic input.

Yes. And ultimately probably marrying those two together.

Exactly. It's perfect. Lung is the perfect place for digital diagnostics because you always have an image. And so -- and there's over 50 different diseases treated by pulmonologists. So we think there's really great opportunity to marry the multiomics, right, the digital diagnostics along with the blood-based insights.

On the new tests with -- on the digital side, are they going to be a panel size? Like how many genes are you guys looking at?

On the digital side, it's actually not genes. It's looking at radiological features off of the CT scan.

No, I meant the digital PCR, ddPCR.

The ddPCR. The current on-market is four tests. So it's targeted for the earlier-stage cancers where you're really looking for a handful of mutations that have approvals. But in our services side, we can do -- we'll look at one mutation up to a couple of dozen mutations.

Okay. And then obviously, you'll just be able to scale that with other tests as they come on.

Absolutely.

That's really helpful. 80% gross margins, I mean, part of that, obviously, is just due to the test technology for mass spec, et cetera, but -- and the PCR. But as the market moves to whole exome, whole genome, why do you feel that where you guys are from a technology perspective that this is the right way to do it versus just jumping in and saying, let's just start sequencing everything.

Yes. I think it's definitely one approach is to get all the data and then be able to mine it, that works. We think that a more targeted approach works well for general population and general use. There's organizations like MSK who sequence absolutely everything and have the capabilities to do so on every patient, whereas the other clinics and clinics maybe farther out in the community don't necessarily have those capabilities. So we think it's really trying to provide the right test for the right patient at the right time.

Okay. And then as you continue on your growth, I mean, from a guide perspective, but also just as an infrastructure building on your own stuff, so like you guys are doing EMR integrations, right? So talk about how kind of the lift that you needed to do to get that and then what that -- ultimately kind of what you feel like that translates to on a reorder basis or increasing your market share basis?

Yes. The EMR integration is a really important project for us from a logistics standpoint, helping to identify the right patient for testing, helping to transmit the appropriate information from the office to us to cut out paper and fax machines, which is still the most commonly used ordering technique in medicine. It's kind of amazing that we're here and we can do so many things with technology and yet fax is still by far the majority.

It's a big focus for us and for a lot of hospital systems to try and get away from using paper and better streamline the medical records. And so we think it's a really important part of our strategy going forward, not just from reorder rates and physician engagement, but from the operational standpoint and operating leverage.

And this is on Epic? Or is it across all of them?

Across all of them. There's many, many, many EMR systems.

Yes. So that should help. And I kind of touched on it before, but obviously, this helps just the ease of ordering and also it helps if a patient comes in and like just a sign comes up like, hey, probably you given this test. But outside of that, when you're thinking about the penetration of the market, you have your core pulmonologists that you're selling to now. Talk about the overall wallet share gains that you've had, the reorder rates and how those have picked up.

And then couple that with new wins, right? So landing new hospitals or landing new pulmonologists. And are you seeing that time for them to accelerate or like, bring on more of those patients, start to shrink?

Yes, it's a great question. The great part about this market segment is everyone knows there's a problem. We know there are so many, many patients and managing all of them, finding the right patients and getting them to the right treatment path is complex, and we don't get it right all the time. In fact, about 20% of patients who go on to CT surveillance actually have cancer, so should have gone on for an intervention. About 65% of patients who get a biopsy didn't need it. And 35% of patients who got a surgery and had a portion of their lung removed didn't need it. And so this is really where we focus.

And so getting to a clinical, yes, is really pretty straightforward. Physicians want more information to be able to help them make better informed decisions. It's the logistics that's the hard part. And that's getting integrated with the offices, that takes time. So getting to the yes is fairly straightforward, the pull-through with the office is really where a lot of our integration teams time -- where they focus.

Okay. And on that, I guess, like just creating efficiency within the overall diagnostic workflow. Talk about your ASP, what's your reimburse rate right now? And as you think about kind of where that adds cost and ultimately, you're taking cost out where you're talking about like does this patient need a biopsy, right, everybody -- 65% don't. And then on the other side, like the worst case is you don't have cancer and then like you got it.

Yes. So I've worked in reimbursement for about 20 years. And most of the time, when you're having a conversation with a payer, you're introducing a problem they may not be completely aware of and then telling them you have the solution to that problem they didn't necessarily know they had.

Consulting 101.

Exactly. This is a different space. So payers know, hospital systems know, physicians know they've got a problem. And from a payer standpoint, their second most expensive vertical is advanced cancer. So they want to catch those cancers earlier. They don't want those patients with cancer going on to CT surveillance. They also absolutely hate unnecessary care and paying for things that didn't need it is not something they love. And from a health system and physician standpoint, they want the right patient in the right group.

So yes, there are cost savings by avoiding uneffective care and ineffective treatment decisions. But from a physician standpoint, they have a set number of patients that they can do biopsies on in a day. We're not changing necessarily how many patients are getting them. We're just trying to capture the right patients into those groups.

Yes, get them the right care at the right time.

Exactly.

Yes. And that's all they want to do anyway.

Yes. We spoke with one hospital system. They're in 5 states. They went through, they found in the last 6 months, they had 100,000 patients in their hospital system that had lung nodules and no follow-up.

That's horrible.

It's awful. And because time matters, you wait a couple of months and that cancer can advance.

How much of that is due to the patient compliance of just not wanting to go in and do the workup?

There's definitely some of that, particularly for those that are discovered incidentally, they go in for a stroke or a heart issue, you're focusing on something a little bit more urgent. But it's also just being able to identify those nodules, get them into the systems and manage them quickly.

Okay. And then -- I was just looking at the time here. Like I said, we can definitely go over because we started a little bit late. But as you're thinking about -- like so the digital ordering, you've talked about this, you have the EMR. Your overall like commercial organization, talk about what investments that you guys have made and ongoing investments here to continue to penetrate? I think -- I don't know if you told me the penetration number you have for the pulmonologist versus the PCP right now.

Yes. It's -- we're mid-single digits with the pulmonologists. We just really started calling on primary care. Our first group of primary care sales reps hit the field in the third quarter. So we're pretty early on. But volumes from primary care in the fourth quarter were about 12%, saw almost 70% year-over-year growth from that group, which was great; about 28% growth in pulmonology from -- on a much bigger end. So we're very pleased with how that's growing.

We added about 35 sales reps last year, went from about 65 to almost 100. We'll add another 25 this year because we only have about 100 folks calling on about 30,000 physicians. And so our primary investment base is getting feet on the street to help educate and build the market.

Yes, hand-to-hand combat. What kind of growth are you guys looking for out of those reps? Like how -- so from the reps that you've had, let's say, for the last 2 years versus the ones, obviously, just onboarding, like what's the scale and productivity levels?

Yes. In the fourth quarter, average revenue per rep was about $1 million, which is great, especially because a very large portion of that sales organization is brand new with most of them hired in the second half of the year. Our reps, who have been in the field a little bit longer, we see really exciting productivity numbers, and we're seeing the new reps on the ramp towards those numbers. We think the $1 million is sort of a baseline for us. And -- but we haven't really seen in territories, we haven't seen them max out. So we're...

Yes, it's so new, right? I mean...

It's so new.

[indiscernible] penetrated.

Yes. We're really the first on market. We're building the market. And so it's a heavy education sell at this point, and we're learning and adapting every day.

So as you think about the overall lung workflow, right? So I mean, do you have any ambition to get into screening or replace the -- because it's just imaging based right now, right?

It's just imaging-based right now, but there are several MCEDs, the multi-cancer early detection or the SCEDs, single-cancer early detection tests that are out there that are coming. It's not in our pipeline right now, but we think that those tests will really supplement the market. There's a huge population that's eligible for screening that's just not going in, and these tests can help find them and put them into the funnel.

Any ideas like just from a commercialization to partner with them or like kind of link up with them as they educate the market and unlock a big piece of that, I feel like it would just be like an easy cross-sell to you or hand-off to you, if I...

We completely agree. We've had great conversations with many of those companies as they're working towards getting to market in lung.

This is great. I mean it's a great ramp and a great story.

Thanks very much. We're very excited about it.

I really appreciate the time. Thank you.

Thank you.

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

Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the fourth quarter and fiscal year of 2025. Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com.

As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast.

In addition, we will discuss non-GAAP financial measures on this call. A description of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris, and thank you all for joining today. At Biodesix, our mission is to transform patient care and improve outcomes through personalized diagnostics that are timely, accessible and address immediate clinical needs. We leverage a multimodal approach that includes genomics, proteomics and radiomics combined with AI to discover, develop and commercialize innovative diagnostic tests for physicians, biopharmaceutical, life sciences and diagnostic companies to help improve patient care. In 2025 and 2026, we're focused on three main goals: growing top line revenue, improving organizational effectiveness and operational leverage and advancing our pipeline for future commercial growth and expansion.

In the fourth quarter, we made progress on all three goals. Our top line growth accelerated with revenue up 41%. We improved upon already strong gross margins by 400 basis points to 83%. We achieved adjusted EBITDA positivity, and we presented real-world clinical data that continues to support the use of our on-market test and demonstrates the potential of our product pipeline. Starting with our clinical offerings in lung diagnostics, our major focus remains on lung nodule management where nodules are either found during low-dose CT screening for lung cancer or incidentally when the patient has an image taken for another medical purpose.

We've implemented a 3-tiered commercial strategy focused on improving the management of patients with lung nodules through the use of our on-market test. This strategy started at the launch of Nodify lung testing with interventional pulmonologists who are typically responsible for diagnosing lung cancer. We then expanded into their referral network in general and community pulmonology. In 2025, we selectively expanded further into the primary care referral network, allowing us to access the remaining 50% of the available nodule market being managed by those physicians.

This approach enhances the value of Nodify lung testing by first helping general pulmonologists and primary care providers triage patients by risk of malignancy and deciding who should be referred for intervention or managed locally by surveillance, then helping interventionalists prioritize higher-risk patients for prompt diagnostic intervention. We continue to see a positive response from our customers with this expanded sales strategy, resulting in strong growth from both pulmonology and primary care.

In the fourth quarter, volumes from primary care accounted for 12% of the total Nodify test, growing 67% over the fourth quarter of 2024 and volumes from pulmonology growing 26%. In total, for the fourth quarter, we had 97 sales representatives active in the field, delivering 18,000 tests or 23% growth. In our last earnings call, we told you about a recent webinar from Dr. Susan Garwood, the National Physician Director for the pulmonology service line at HCA, the largest hospital system in the U.S.

Dr. Garwood detailed her experience and successes with implementing Nodify testing in her referring primary care network. This experience is replicating across the country with Nodify testing being utilized to help health systems identify cancers earlier and manage the sheer volume of patients with lung nodules through better triaging to either intervention or monitoring. In addition to growth in testing volumes, we continue to see improvements in average revenue per test that started to pick up in the third quarter.

This is a result of our market access and revenue cycle management teams delivering additional coverage policies and improved claims collection, particularly for Nodify XL2 and Nodify CDT. On the development services front, we continue to see increasing interest in our distinctive offerings where we leverage our multi-omic approach and R&D expertise to help deliver insights that our biopharma, life science tools and diagnostic partners use to personalize patient care and help improve disease detection and treatment decisions across various disease types.

We announced two major partnerships to develop and validate test as a center of excellence for Thermo Fisher Scientific and separately with Bio-Rad Laboratories. These partnerships are an important recognition of the strength and breadth of capabilities in our team to deliver high quality and rapid results for our partners. In December, at the Association for Molecular Pathology, or AMP, Annual Meeting, we were joined by collaborators from Memorial Sloan Kettering Cancer Center, Thermo Fisher and Bio-Rad to present on these key partnerships and provide insights into portions of our product development pipeline.

Today, our development pipeline consists of a unique MRD test that combines the proteomic information from our proprietary risk of recurrence test that provides insights into a patient's immune profile, along with tumor-informed genomics that leverages the high sensitivity and specificity of multiplex Droplet Digital PCR for disease monitoring. It also includes expansion of the VeriStrat test into immunotherapy selection in several new tumor types, including colorectal cancer. As well as another expansion of the VeriStrat test for prostate cancer, predicting the likelihood of response to standard of care hormone therapy.

We also have a new ESR1 genomic test, which is available to help guide treatment in breast cancer. And lastly, AI-based digital diagnostics that will initially supplement our current on-market tests in lung disease. You'll hear more about the new AI-based digital diagnostic test offering in the coming quarters. Throughout the course of 2025, we continue to generate, present and publish real-world clinical and health economics data for our on-market and pipeline products. In order to help drive the adoption of our test by health care systems, health care providers and payers, we published new clinical data and had multiple data presentations at a variety of physician society meetings.

Our efforts were supplemented by data presentations from our partners and by a number of independent clinicians publishing on their own data on the real-world use of our test.

To summarize, we finished 2025 strong with excellent fourth quarter performance, including accelerated revenue growth to 41%, delivered 83% gross margins, which are the strongest in advanced diagnostics, recognized significant improvements in reimbursement, achieved adjusted EBITDA positivity, generated strong clinical and real-world evidence for our on-market and pipeline products, announced additional key development partnerships and increased the number of services contracts and customers utilizing our offering. With that, let me turn it over to Robin to review our financial performance and provide initial 2026 guidance. Robin?

Thanks, Scott, and good afternoon, everyone. Total revenue was $28.8 million and $88.5 million for the fourth quarter and fiscal 2025, an increase of 41% and 24% over the respective prior year period. Lung Diagnostics revenue of $25.1 million and $79.2 million for the fourth quarter and fiscal 2025 was an increase of 46% and 22% over the respective prior year periods. Lung diagnostics revenue, excluding claims older than 1 year, was $24.1 million, representing core organic growth of 40% over the prior year comparable period.

The overall increase in lung diagnostics revenue was driven by growth in test volumes and an increase in average revenue per test. Test volumes were 18,000 and 62,600, growth of 23% and 15%, respectively. The increase in average revenue per test was driven by the advancements in reimbursement that began in the third quarter from improvements in payer coverage and revenue cycle management and approximately $1 million in collections from claims older than 1 year.

Development services revenue of $3.6 million and $9.3 million for the fourth quarter and fiscal 2025 was an increase of 12% and 41%, respectively, and was a result of both delivering against our book of contracted business and securing new agreements. Following a strong finish and the highest revenue of any quarter in 2025, we finished the year with $11.8 million of contracted business going into 2026. Our gross margin percentage was 83% for the fourth quarter and 81% for the fiscal 2025, a 400 basis point and 300 basis point improvement, respectively. The ongoing improvement was driven by growth in lung diagnostic testing, improvements in average revenue per test and optimization of testing workflows that resulted in decreases in average cost per test.

Gross margins continue to be a hallmark of Biodesix performance and operational excellence, and we expect them to remain near 80% throughout 2026. Overall operating expense, excluding direct costs and expenses, were $25.8 million and $99.7 million for the fourth quarter and fiscal 2025, an increase of 14% and 10%, respectively. Sales and marketing investment increased 14% to support the 40% core organic lung diagnostic revenue growth in the quarter. Total SG&A was $23 million and $87.5 million for the fourth quarter of fiscal 2025, a 14% and 9% increase, respectively.

Growth in SG&A was primarily driven by the expansion of our sales organization from an average of 65 reps in the field in the first quarter to an average of 97 active in the field in the fourth quarter. In 2026, we plan to add approximately six reps per quarter as we continue to build out our commercial structure to drive growth through increased market penetration. We expect continued operating leverage as the recently expanded sales team gains tenure and experience selling the Biodesix test. R&D expense was $2.9 million and $12 million, a 19% and 26% increase over the prior year. R&D reflects the investments in clinical studies to help advance adoption of our lung diagnostic tests as well as advancement of our pipeline.

Net loss was $4 million and $35.3 million for the fourth quarter and fiscal year, an improvement of 52% and 18% over the prior year period. Adjusted EBITDA, which excludes noncash and other onetime items, was a positive $530,000 for the quarter, which was an improvement of 113% over the fourth quarter of '24 and is the company's first ever positive adjusted EBITDA quarter. This milestone reflects strong revenue flow-through and operating leverage across the organization.

Adjusted EBITDA for the year was a loss of $17.5 million and improved 21% over 2024. Pro forma cash and cash equivalents is $33.7 million, including subsequent at-the-market proceeds, supported by our first quarter of adjusted EBITDA positivity, which positions us to reduce quarterly cash consumption as revenue scales. We ended the quarter with $19.0 million in unrestricted cash and cash equivalents, which was an increase of 14% over the third quarter, including $2.3 million in at-the-market proceeds.

Subsequent to the end of the quarter, an additional $14.7 million in at-the-market proceeds were raised, and we amended our senior secured term loan with Perceptive Advisors to extend the maturity date and interest-only period to November 2028. The extension and additional cash strengthens the balance sheet and provides increased flexibility for the organization.

Turning to guidance for 2026. We expect to deliver $106 million to $112 million in annual revenue, the midpoint of which represents 23% annual growth over 2025 and expect continued improvement towards sustained adjusted EBITDA positivity. The revenue growth and improvement on the path to profitability is expected to be driven by increased tenure and experience of the recently expanded sales force, increases in average revenue per test demonstrated in the second half of 2025, additional clinical data on the Nodify lung test to help drive adoption from health care providers and payers, increase in the development services pipeline and the demonstrated operational leverage.

We do want to acknowledge the recent weather events and seasonality historically seen in the first quarter, which has been considered in the guidance range provided today. Now I'll turn it back to Scott for some closing thoughts before the Q&A.

Thank you, Robin. In closing, I want to thank every member of the Biodesix team for your unwavering commitment to our mission, the health care professionals we serve and the patients they treat. Our culture is not just aspirational, it is operational. It shows up in disciplined execution in how we serve health care providers and in how we build trusted industry partnerships. 2025 demonstrated the strength of our strategy and the resilience of our model. As adoption expands and awareness grows, we continue to deliver clinical value, strengthen customer relationships and drive scalable, durable growth.

We remain focused on operational discipline, capital efficiency and expanding our impact in lung cancer care. The opportunity in front of us is significant. Our team, culture, differentiated test portfolio and disciplined execution creates sustainable long-term value for health care professionals, patients and shareholders alike. We are operating from a position of increasing strength and remain confident in our ability to execute against a significant long-term opportunity.

Thank you to our team, our customers, our partners and our investors for your continued trust. We are building a high-performance organization designed to deliver meaningful impact and sustained value quarter after quarter, year after year. Let's now move to questions. Operator, let's start with the Q&A session.

[Operator Instructions] And our first question comes from Kyle Mikson of Canaccord Genuity.

Congrats on a great year. I want to go back to the first quarter comments and just trying to understand how much of a step down we should expect with the revenue and volume with respect to the -- I guess, just relative to the fourth quarter because there seems like there was a little bit of a flush, maybe some revenue that was from prior periods or pulled forward in the fourth.

So if you could talk about how we should think about the step down for volume and then pricing and especially given the deductible dynamics and then the weather, too. I mean, I know you referenced that, but there's obviously been some storms and stuff in the Northeast and other places. So it would be helpful to understand that.

Thanks, Kyle. It's a great question. Yes, there's a lot of dynamics at play here and the weather disruption across the country and most recently in the Northeast absolutely is a consideration for us. And you're right, we did have some increased collections in the fourth quarter, about $1 million of collections from claims over 1 year. So when we're looking at the first quarter versus fourth quarter, I would encourage everyone to compare it to the revenues, excluding that $1 million.

In the first quarter, we usually always see a step down in ASP, and we expect that similar step down that we've seen in prior years. Same with the volumes. So we're anticipating that the volume dynamics and the ASP dynamics are consistent with our historic seasonality.

All right. Great. And maybe just one on the pipeline as well. I think I heard Scott, you were mentioning going into some detail about some of the tests. Could you -- maybe just to the extent that you had not already shared on the call, could you talk a little bit more and elaborate on those new tests, what you're developing, what you aim to launch in the next 12 to 18 months, I'd say. And ultimately, like what are you most excited about in the kind of future portfolio for the company?

Yes. Thanks, Kyle. Great question. You may recall at AMP, Dr. Gary Pestano led an R&D Day representing Biodesix, where we had other participants from Bio-Rad, Thermo Fisher and Memorial Sloan Kettering. We are planning on providing another R&D update this year, where Gary and that team will have an ability to highlight the progress that's been made since that last meeting. In your question, we are not planning on commercializing any of those within the next 12 months. We're very mindful. We have laser focus on our march towards profitability. And we don't want to launch any no pay tests. We want to be very mindful of reimbursement, reimbursement timing and the appropriate studies that will help put us in a positive reimbursement position.

We'll continue to give other updates as to what the opportunities look like for those tests. And when you ask the question of what excites me most, I think it's really about highlighting what our development team is capable of, has done in the past and will do in the future. We think the world of our team, and it's about time that others start to see what they're able to deliver. And so we're eager to give Gary and team an opportunity to do so.

Perfect. And then finally, on the primary care kind of rep cohort that you've been building, I think now that almost all of them are probably up to speed and mature and kind of full productivity at this point. Given they've had this time to ramp, what is the approximate volume that is accounted for by that rep base by the primary care rep base?

Is it above the 11% that you saw in the third quarter? And how do you feel about that mix, I guess, as you sort of look to the -- throughout '26 as the year, you've had the proven ground in '25 and now '26 the year to kind of -- that will pay dividends, I guess.

Yes, it's a great question. We continue to see the primary care focus perform and deliver. It grew over the 11% that you referenced, up to 12% of total notify orders coming out of primary care. We expect that to continue to grow as we scale. You referenced some of our sales professionals. I was honored to be in San Antonio, Texas this week with our sales team as we kicked off our 2026 national sales meeting. And I can tell you, sitting both with our pulmonology-focused and primary care focused sales teams, they both feel strongly and feel confident about their ability to continue to grow, and they're eager to do so.

And so we'll continue to provide highlights there. But as we look at adding approximately 24 sales reps again this year in 2026, we think we can continue to grow and scale across the board. So we'll give updates on a quarterly basis. But we see both teams thriving right now. We're proud of them. But we also think it speaks volumes about the opportunity and our ability to address more of that market by going into PCP.

And just as a reminder, again, this is not about us calling on every primary care physician. This is about us building relationships within pulmonology, better understanding their referral network and patterns and working through them to reach those primary care physicians so that we can increase the opportunity to diagnose and detect cancers earlier. And we feel confident that in doing so, we'll see a state shift over time.

Our next question comes from William Ruby of TD Cowen.

First question is just you reached adjusted EBITDA positivity in the quarter and you tapped into your ATM and you're sitting in pro forma with $33.7 million in cash. Just wondering if you feel well positioned now from a cash perspective and if you see any need to add additional cushion in '26. And I have a follow-up as well.

Thanks, William. Appreciate the questions. Yes, we feel very good about the cash position. We not only showed the operational improvement, strong gross margin improvement that helped contribute to our operating leverage for the quarter, but then also adding the extra cash opportunistically through the ATM really strengthened the balance sheet and gives us flexibility going forward. So yes, we feel very good about where we are from a cash perspective.

Got you. And then also just on the guide came in above the Street. Just wondering -- what do you see as some of the most likely upside levers this year to guidance?

Yes. We think we have a couple of upside levers. We've got a sales organization that is gaining in tenure and experience out in the field. We hired quite a few sales team members in -- really in the last part of the year. And so they're really just getting their feet under them. And for most of the -- or a larger portion of the organization, this will be their first full year in the field.

So we think we've got opportunity for increased rep productivity from a test perspective, continuing the ASP stability and growth that we saw in the second half of last year, not to mention the increased excitement about our development portfolio and what we're able to offer to partners. So we think really, we've got opportunities to grow both portions of the business and really it's volume, ASP and development services funnel.

Got you. If I could just ask one more actually. I think you mentioned on the Q1 call, and I think Scott mentioned earlier, and Susan Garwood's presentation mentioned as well that you seem to see some stage shift by referring through primary care. I'm just wondering if you've seen any additional evidence of like shifting stage and if you'd even potentially want to do real-world studies to demonstrate this effect where you're shifting stage earlier.

Yes. Thanks, William. It's a great question. We have. The way it usually transpires is physicians will share with us what they're seeing, some of their performance, we've encouraged those individual physicians and sites to publish that data. So it's a little bit out of our control, but we encourage them to do that because we think that will speak or at least send a very powerful message because it's not company-sponsored. We are talking about that. Whether we're able to achieve that through CLARIFY or not, we'll continue to investigate and explore options to do so. But most importantly, we want to encourage those physicians that are seeing the positive impact of utilizing Nodify testing. We want to see them share that data.

And it's not really about promotion, it's about awareness. And if we can increase more awareness, we think we'll have greater compliance. We think patients will be interested in receiving the testing and so will physicians and they'll allow that to guide them. But as we know, in lung cancer, we're dealing with the deadliest cancer. So any material impact in shifting stage of diagnosis is going to be meaningful in overall long-term survival.

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

Maybe I'll pick up on that last question there sort of around the data readouts that you expect. I think you've been making some good progress on CLARIFY over the last couple of quarters. So anything new to share there when we should maybe expect some of that data to read out? And then on ALTITUDE, just an update on potential readout for that study as well.

Yes. Thanks, Andrew. Great questions. With CLARIFY, we're going to continue to look at different interim analysis and kind of subgroups, if you will. With CLARIFY, we're not going to wait for CHEST. So we'll continue to submit those abstracts and papers to different journals. We don't feel the need to wait. We think it's more important to get that data out there. We have submitted some here recently. And so we'll keep you updated as we receive word back on their acceptance and then publication timing.

But that's going to be -- again, that's real-world data. It's very exciting for us to get that out there and demonstrate how physicians are utilizing the test, how it's performing and the impact it's making. In regards to ALTITUDE, you may recall that we stopped enrolling ALTITUDE. And now we just have to monitor those patients for a minimum of a year and then up to 2 years. So for 2026, we won't hit the 1-year endpoint until third quarter. So that -- what that means is we will miss the CHEST submission timing for 2026. So at the earliest that we'll see any data out of ALTITUDE is going to be at some point in time in 2027.

Perfect. And then I want to go back to sort of the different channels here, primary care sort of being one of them. And thanks for all that color that you gave on sort of mix and growth within the different channels. Can you maybe just sort of talk about what you're seeing in the field in terms of these efforts being complementary to each other as opposed to maybe cannibalistic?

Yes, it's a great question. It's one of the reasons why we highlight that we start by building a strong relationship within pulmonology. We know that pulmonologists are responsible for diagnosing lung cancer. We also know that they're stressed. There's a significant burden there. There's lengthy wait times in their clinics. Their practices are filling up more and more.

And so if you take kind of that needle in the haystack approach, anything that we can do to help them enrich the patients that they're seeing, increasing the likelihood that they're spending time with the highest risk patients, those with the highest likelihood of lung cancer, then we know that they'll have a greater impact. That in and of itself is what this is about. Those pulmonologists, and we referenced Dr. Susan Garwood using her as an example, it's one of the reasons why they really see the value in promoting and pushing Nodify testing out into their referral network so that a positive CDT is referred on quickly and pulled to the front of the line.

And on the other extreme, somebody that's positive for Nodify XL2, meaning that they can sit back and take a wait-and-watch approach supported with CT surveillance on an annual basis, those patients aren't referred in a pulmonologist because they just block or take up an available slot for a high-risk patient. So we continue to see a number of those on a weekly and monthly basis. Those positive stories really reinforce that not only was it the right strategic decision, but that we continue to have success.

And then internally, we've talked a lot about having 50 sales territories and having a squad or team approach within the field, and I referenced being at our national sales meeting. What I saw was a team that is heavily motivated and focused on the team. There's lots of collaboration, they're sharing of best practices, and they're excited to positively impact patients, first and foremost. And so we are seeing it work exceptionally well. And we continue to anticipate broader adoption as we progress through 2026.

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

Just kind of teeing off the last question there. So when you think about the additions you're making to the sales force in 2026, can you just help us understand what that allocation is going to be between PCP and pulmonology?

Yes. Thanks, Thomas. We haven't disclosed that. And one of the things that we pride ourselves on is being agile and being able to adapt. And so what really will lead us to hiring one or the other is current performance today. As we continue to grow and scale, we want to take a need-based approach. We don't want to be too prescriptive. We've got some territories that are very mature. We've had great success in penetrating that market for a lengthy period of time.

Those are going to be the teams or squads where you've got great representation of the different specialization and call point focus. We still have some territories that are newer or earlier in that maturation. And so that mix based upon performance will guide us, and we'll give you guys updates as we make those hires. But right now, we're really focused on -- it's going to be -- the majority will be a blend of associate sales professionals and primary care focused sales professionals.

And maybe just playing that out, you probably won't be able to share anything quantitative, but maybe qualitative, how do you see the differential growth rates through 2026 between the two channels?

Yes. Again, I can't really be that prescriptive because we don't know exactly where we'll be focused on hiring and when. We just know there's a massive opportunity ahead. We're barely scratching the surface in this addressable market on both the primary care and the pulmonology front. So we see growth opportunities across the board in both. But reminding everybody, reimbursement is the same, right?

In this patient population, we're still focused on patients that are of Medicare age predominantly. So we've got a pretty well-defined reimbursement path and trajectory. For us, it doesn't really matter where it's coming out of. It just matters that we're getting to more and more patients on a quarterly basis.

And then just a quick one. Any insight to share on the HEDIS guidelines?

Yes, nothing new on HEDIS. I think it was September time frame of last year that they stated that they wouldn't provide the update for 2025. We're eager to see what they say here in 2026. We know that the problem isn't going away. The challenge still will remain. And we know that once they make those statements, it will create a different change than we're able to facilitate ourselves. And so we've referenced the example in breast cancer historically. We're eager and supportive of this. It will benefit us and help.

But most importantly, it will impact those patients that need to get screening earlier and get into this queue so that we can see earlier detection and diagnosis. But when it comes to HEDIS and guidelines, no material updates. Both parties just continue to state that they will continue to prioritize it and provide updates in 2026.

And our next question comes from John Wilkin of Craig-Hallum.

Congrats on hitting the EBITDA milestone in Q4. I wanted to touch a little bit more on sales rep productivity. Are you able to parse out at all? So you added around 8,000 tests for the year. Are you able to parse out how much of that growth came from the new reps you hired within the year versus your existing sales force?

Yes, absolutely. We track everything very, very closely. The important thing to remember is the majority of the new reps were hired later in the year. So a lot of the growth that we saw came from our existing reps. We, of course, saw growth from the new reps and so it was pretty balanced. But where we really expect to see growth from the new reps is in 2026 as they have a full year in the field and more time and more experience selling the test.

Got it. And then for the -- I don't know to the extent that you're able to quantify, so I mean, thinking about reps that are maybe hired like earlier in 2025, are you able to give us any sense of how productive those reps were by year-end? Just to give us a sense of how long it has been taking recently for newly added reps to ramp?

Yes. We've been very, very pleased with the caliber of reps that have been hired and brought in. We historically have seen that it takes to 3 months for a rep to pay for themselves, and that has continued with the new batch of reps. So we've been very consistent there. But that's -- it's important to note that's not the end of the ramp. That's really just the beginning.

And so we see reps continue to ramp not just in their first year, but ongoing. As I stated, we continue to see growth from existing reps and some who have been here for a couple of years. So the growth trajectory is there. We're seeing it, and there is huge opportunity for every rep in our field.

This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

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" William Blair & Company L.L.C., Research Division

" Canaccord Genuity Corp., Research Division

" Lake Street Capital Markets, LLC, Research Division

" TD Cowen, Research Division

Good day and thank you for standing by. Welcome to the Biodesix Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Chris Brinzey. Please go ahead.

Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the third quarter of 2025. Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com.

As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast.

In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.

I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris, and thank you all for joining us today. At Biodesix, our mission is to transform patient care and improve outcomes through personalized diagnostics that are timely, accessible and address immediate clinical needs. We leverage a multimodal approach that includes genomics, proteomics and radiomics combined with AI to discover, develop and commercialize innovative diagnostic tests for physicians, biopharmaceutical, life sciences and diagnostic companies to help improve patient care.

In 2025, we are focused on 3 main goals: growing our top line revenue, improving operational effectiveness and efficiencies that will help drive a positive adjusted EBITDA in the fourth quarter and advancing our pipeline for future growth and expansion.

In the third quarter, we made progress on all 3 of these goals. Our growth is accelerating with revenue up 20%. We improved upon our already strong gross margins by 400 basis points to 81%. We improved adjusted EBITDA by 18%, and we presented clinical data that continues to support the use of our on-market products and demonstrates the potential of our product pipeline.

Starting with our clinical offerings in lung diagnostics, our major focus remains on lung nodule management, where nodules are either found during low-dose CT screening for lung cancer or incidentally when the patient has an image taken for another purpose. We have implemented a 3-tiered commercial strategy that helps to improve the management of patients with lung nodules and increases the growth potential of our on-market test.

This strategy started at the launch of Nodify testing with the interventional pulmonologists who are typically responsible for diagnosing lung cancer. We then expanded into their referral network in general and community pulmonology.

Most recently, in this past year, we have very selectively expanded further into the referral network by calling on primary care providers. By taking this next step into the pulmonology referral network, we have expanded our access to the available nodule market that includes 50% of patients with pulmonary nodules who are managed in primary care.

This approach enhances the value of Nodify Lung testing by first helping general pulmonologists and primary care providers triage patients by risk of malignancy to be referred in for intervention or managed locally, then helping interventionalists prioritize higher-risk patients for prompt diagnostic intervention.

Our first large cohort of primary care sales representatives were in the field for the full third quarter, and we've been encouraged both with the response from providers and with test adoption from their target accounts. Prior to the initiation of our primary care pilot conducted in 2024, only 4% of Nodify tests were ordered from primary care. In the short time this new effort has been in place, that number has increased to 11% in September. Overall, total tests ordered from primary care in the third quarter grew 75% over third quarter of '24.

Last week, Dr. Susan Garwood, the National Physician Director for Pulmonology Service Line, Pulmonologist and Thoracic Oncology Medical Director for HCA Enterprise, conducted a national webinar on Nodify Lung entitled "A Triage Tool Supporting Primary Care Referral Decisions." During the presentation, Dr. Garwood shared their early experience of a 4-clinic primary care practice that recently implemented Nodify Lung testing to assess lung cancer risk across their large patient population.

By implementing Nodify Lung testing, they identified multiple patients with early-stage lung cancer where curative surgery remained a viable option while avoiding unnecessary strain on bronchoscopy suite resources that would otherwise be required to evaluate dozens of patients. A recording of this webinar is available on our website.

We continue to receive similar positive feedback and success stories from our team and directly from health care providers nationwide as we execute our strategy. We have also made significant progress in making it easier for clinicians to order and implement our test in their practices. In fact, one added benefit to our expanded sales strategy is the availability of on-site blood draw capabilities.

This has historically been a challenge in pulmonology, where we frequently need to leverage our extensive mobile phlebotomy network to draw blood away from the office. Once a patient leaves the physician's office, we face the all too common challenge of patient compliance to ensure the blood draw is completed.

Completing the blood collection on site before a patient leaves the facility, either through on-site phlebotomy services or through our own capillary draw kits, resulting in more tests being delivered than if the patient leaves and needs to schedule a blood draw at another time. Ordering the test in the primary care setting and collecting the sample on site helps to overcome this challenge.

Similarly, electronic ordering streamlines the process and ease of use for the physicians in their office. Customer retention in those offices who utilize digital ordering is significantly higher than those who do not. Since Nodify launch, we've expanded our digital test ordering capabilities through our Biodesix physician portal and a number of early EHR integrations. Through these efforts, our digital ordering has increased by 43% over last year.

In the third quarter, we had an average of 85 sales reps in the field who delivered 15,700 total lung diagnostic tests, up 13% year-over-year. We are continuing to execute on our stated strategy and plans and are expecting to have an average of 93 to 97 reps in the fourth quarter. Next year, we anticipate returning to a cadence of adding approximately 6 per quarter, continuing to drive patient access to cutting-edge diagnostic testing.

In addition to our volume growth, our average revenue per test improved by 7% over the second quarter of '25 due to our market access team's success in gaining more coverage and contracting for our test as well as process improvements and subsequent successes from our revenue cycle management team. In addition to our commercial efforts, we continue to generate clinical evidence to drive physician and payer adoption of Nodify testing.

Two weeks ago at CHEST, which is the largest annual pulmonology meeting, we presented interim data from our CLARIFY study, new health economics and outcomes data, and there were multiple independent presentations and abstracts on Nodify. CLARIFY is a retrospective chart review evaluating the use of Nodify testing in real-world clinical practice, expecting to enroll approximately 4,000 patients.

In the presentation, Dr. Michael Kammer, the Head of AI and Radiomics at Biodesix, reviewed data on Nodify CDT from the first 1,000 patients enrolled in the study, just 1 year after the study began. The data showed consistent performance of Nodify CDT in a real-world setting versus prior clinical research with similar sensitivity and specificity. This study is an important addition to our existing evidence package for Nodify testing, introducing data from a real-world environment that will continue to reinforce the clinical utility of Nodify.

The results from the independent analysis build on existing clinical evidence showing the value of Nodify testing at independent practices across the country, the performance of the test in nodules detected in lung cancer screening programs and showing that Nodify testing had superior performance as compared to PET scans. More data will be released in the coming months, including at the upcoming ILAC-ASCO North American Conference on Lung Cancer in December.

Shifting to development services. We continue to see strong interest in our partnership service offering. We leverage our multi-omic approach and R&D expertise to help deliver insights that our biopharma, life science tools and diagnostic partners use to personalize patient care and help improve disease detection and treatment decisions across various disease types.

In the third quarter, we delivered $1.9 million in revenue, growing 97% year-over-year. The funnel has also continued to grow with the team exiting the quarter with $12.9 million under contract, but not yet recognized, representing a 16% increase over last year at this time and another all-time high.

Moving to our product development pipeline and services partnerships. We had multiple presentations on our products in development at a number of medical and scientific meetings. Our current pipeline consists of our combination proteomic and genomic MRD test, expanded indications for VeriStrat into several new tumor types with immunotherapy selection and digital diagnostics.

Multiple presentations on the MRD test were presented at the Tricon Precision Medicine Conference, the AACR Annual Meeting and ddPCR World. Our unique MRD test combines the proteomic information from our risk of recurrence test that can give insights into a patient's immune profile, along with tumor-informed genomics that leverage the high sensitivity and specificity of multiplex droplet digital PCR for disease monitoring.

One exciting recent update is an expanded product development partnership with Bio-Rad Laboratories in which we will conduct the development, clinical validation and regulatory submissions of certain high-complexity in vitro diagnostic assays based on Bio-Rad's ddPCR technology. The first assay will be ESR1, which is becoming critical in HR-positive, HER2-negative advanced breast cancer.

We expect the partnership to expand, enabling highly sensitive and specific detection of additional genomic markers utilizing Bio-Rad's QX600 platform. This is another key partnership in addition to those already announced with Thermo Fisher Scientific and Memorial Sloan Kettering Cancer Center and are examples of the strength of the Biodesix development services offering, including the conduct of assays under design control, quality management systems, regulatory and reimbursement support for in vitro diagnostics.

Coming up on November 12 at the AMP Annual Meeting in Boston, representatives from Bio-Rad, Thermo Fisher and Memorial Sloan Kettering will join a panel led by Dr. Gary Pestano, our Chief Development Officer, to present on the Biodesix R&D developments, our unique and highly specialized partnerships with these premier institutions and updates to the product pipeline. A recording will be available on our website following the event.

Overall, we are very encouraged by the continued strong year-over-year growth in this business and believe there is significant potential for upside as both existing business and additional opportunities mature.

Finally, turning to guidance. Based upon how we closed the third quarter and based upon the momentum we're seeing early in the fourth quarter, we are comfortable increasing our revenue guidance range for 2025 to $84 million to $86 million.

With that, let me turn it over to Robin for a review of our financial performance for the quarter. Robin?

Thanks, Scott, and good afternoon, everyone. Third quarter total revenue was $21.8 million, a 20% increase over the prior year. Lung diagnostic testing revenue in the third quarter of 2025 was $19.8 million from approximately 15,700 tests as compared to $17.2 million from approximately 13,900 tests for the third quarter of 2024, representing 13% growth in test volumes and 16% growth in revenue and accelerating growth in both volume and revenue over second quarter results.

Several quarters ago, you may recall that we discussed an issue we were having with a couple of Medicare Advantage plans instituting administrative barriers to paying claims for our Medicare covered tests. In the third quarter, following the efforts of our market access and revenue cycle management team, one of the largest plans restarted paying for current claims, which contributed to the increase in ASP.

Please note that we are still working with the plans in our attempts to collect on older claims, which were not recognized as revenue or booked as AR in the past.

Development services revenue was $1.9 million in the quarter, representing 97% year-over-year growth. We ended the third quarter with $12.9 million under contract. And as Scott previously mentioned, this represents another all-time high. Our gross margin percentage in the third quarter 2025 was 81%, up 400 basis points from 77% in the third quarter of 2024. Despite continued supply cost pressure and existing macroeconomic uncertainty, we expect gross margins to remain near 80% to finish out the year.

Overall operating expense, excluding direct costs and expenses, was $24.7 million in the third quarter, which was a 10% increase over the third quarter of 2024 and a 4% decrease versus the second quarter of '25. Total SG&A was $21.7 million versus $20.0 million in the third quarter of '24, an 8% increase. Of note, total SG&A was a 3% decrease versus last quarter despite having 11 or 15% more sales reps in the field. As Scott said before, we are continuing to scale the sales team and expect 93 to 97 sales reps in the field in the fourth quarter.

R&D expense was $3.0 million versus $2.5 million or a $500,000 increase year-over-year, but a $300,000 decrease from the second quarter. R&D reflects the investments in clinical studies to help advance adoption of our lung diagnostic test and advancement of our pipeline.

Net loss for the third quarter of 2025 was $8.7 million, an improvement of 15% year-over-year and an improvement of 24% over the second quarter of '25. Adjusted EBITDA, which excludes noncash and other onetime items, was a loss of $4.6 million, which was an improvement of 18% year-over-year and an improvement of 36% over the second quarter.

We ended the quarter with $16.6 million in unrestricted cash and cash equivalents, which was impacted by timing of collections, resulting in a $5.2 million increase in accounts receivable, offset by net cash inflows of $4.8 million from our ATM facility. The increase in accounts receivable reflects higher lung diagnostics revenue, newly secured development services agreements and the timing of cash receipts, which have been collected during the fourth quarter.

As Scott discussed, we are updating our full year 2025 revenue guidance to $84 million to $86 million for the year. Because of our strong gross margins and the planned and actual expansion of the sales team and the rep productivity achieved to date, we expect to achieve adjusted EBITDA positivity in the fourth quarter.

Now I'll turn it back to Scott for some closing thoughts before the Q&A. Scott?

Thank you, Robin. To summarize our achievements in the third quarter, we delivered accelerating revenue growth. We improved our already strong gross margins to greater than 80%. We maintained our cost-conscious approach, resulting in a quarter-over-quarter decrease in operating expense.

We improved both net loss and adjusted EBITDA on our path to profitability. We continued the execution of our strategies, including expansion of our sales team, increase in our service revenue and funnel and the addition of new partnerships. And we presented data on our existing tests and pipeline.

Before moving on to questions, I want to restate that we have the best lung health focused team in diagnostics and continue to make significant progress in developing a market in an area that has not historically used diagnostics in the way that other medical or oncology specialties have. With first-mover advantage in lung nodule management and an ever-increasing body of robust clinical and health economic data, we are creating the momentum to drive greater clinical and payer adoption as we move through 2025 and beyond.

With all this happening, it's a very exciting time here at Biodesix. We look forward to sharing more with you in the coming quarters. I would also like to remind everyone that November is lung cancer awareness month, a month dedicated to educating people on this deadly disease and driving awareness that early detection can save lives. Let's now move on to questions.

Operator, let's start the Q&A section.

[Operator Instructions] Our first question comes from Andrew Brackmann with William Blair.

This is Maggie Boeye on for Andrew. Maybe first, just to start, Scott, is there any way you can talk about some of the signals or proof points that your primary care expansion is working? I appreciate that commentary you provided in the prepared remarks about the volume growth contribution from PCPs, but just any other color you can provide there?

Yes. Thanks, Maggie. Appreciate the question. Yes, we've highlighted that this is not about us just going out and cold calling on primary care practices. And so those initial proof points really start when a pulmonologist encourages us and introduces us to their referral network. It's a warm handoff and introduction. They usually stay involved in that early education. And so we get immediate feedback. We have the ability to receive questions from the primary care physician.

When we compare that to what we saw in our pilot that we conducted last year, it's very consistent. And so we think we're continuing to make progress. Our marketing materials are slightly different. Their questions are a little bit different than pulmonologists because their practices are different. So each and every month, we get a little bit better on that front. And as we gain more traction and have additional success, we've got greater confidence. And so it really is about broader adoption and utilization.

One of the things we're tracking, Maggie, and we'll share more about it in coming months and quarters is we really are starting to see primary care physicians highlight earlier detection and diagnosis. And so one of their biggest fears at primary care is that a patient might sit in their practice and they've missed a cancer.

And so in a number of these early adopters on the primary care side, they're starting to track that they're getting earlier diagnosis. And so we feel confident that long term, that will make a significant impact in those patients' lives. And so we look forward to sharing additional data as we have it.

Great. And then maybe just next, I know you have that R&D event next week, but so I don't want to steal any thunder from that. But just anything you can share with respect to some of the ways you look to expand your product portfolio as we move into 2026? What should investors be on the lookout for? And how should we think about investment into those expansions?

Yes. Great question, Maggie. I appreciate it. We're really excited about AMP. We had highlighted earlier this year that we had hoped to have an R&D Day. We chose to utilize AMP for that because of our partners. Bio-Rad, Thermo Fisher, Memorial Sloan Kettering will all be there. So they'll all be participating in our R&D Day.

So what you can expect is really an update on all of the ongoing efforts that we have with them. And we will talk a little bit more about our pipeline. And so as you asked, thinking about 2026 and beyond, we know that our product development pipeline is underappreciated, and we plan to change that. We'll continue to highlight the progress that we've made. We think that we've got some exciting new developments that we can share and hopefully commercialize additional tests in the years to come.

But Gary Pestano, our Chief Development Officer, will be leading that. We anticipate additional follow-up calls with him. We will have a recording of that AMP R&D Day so that we'll post that on our website and others will have the ability to see it. But we think partnership -- our partners speak volumes. And knowing that Memorial Sloan Kettering chose us, Bio-Rad chose us and Thermo Fisher chose us, allowing them the opportunity to share why they chose us, what makes us different and how that will be meaningful to patient’s long term, we think that speaks volumes. And so, we're eager to let them speak.

Our next question comes from Kyle Mikson with Canaccord Genuity.

This is Alex Vukasin on for Kyle Mikson. Congrats on a solid quarter. So, I guess just taking a step back, so you've expanded the sales force from 65 reps in 1Q. Now we're at around 85 in 3Q, expecting that 93 to 97 again for 4Q, so that's fantastic. But could you just elaborate on the ramp-up of the new sales reps as well as roughly what you think peak average sales per rep could be at full productivity?

Yes, Alex, great question. One of the things that we used the pilot with PCP last year to assess was if the call point was different and then what that sales rep productivity could look like. One of the things that we shared was that the ramp was consistent. And so, from hiring to training and onboarding, we saw a consistent performance improvement over time.

We've seen that stay consistent now that we've begun the expansion. And so, we feel confident and we keep striving to get back into that minimum $1 million per sales rep in terms of sales rep productivity. And we've seen opportunity there to continue to grow and expand that. So, we're confident that we can do that.

As we continue to hire these professionals, we'll continue to build a narrative around territories since it's a complementary team approach. We'll have 50 territories here as we exit Q4 going into 2026. We're going to continue to invest, as we've stated, and build out that sales force at about 6 sales reps per quarter. It will be a mix between associate sales consultants and primary care-focused sales consultants. We feel strongly that the 50 territories that we have locked today, we won't have to hire additional pulmonology sales consultants.

So, from a rep productivity metric, we want to get them back to what we saw before we began hiring them and then continue to leverage their access into primary care. We're eager to prove that out, and we'll look forward to sharing some of those performance metrics at the end of the fourth quarter and as we progress into 2026.

That's fantastic color. And one more for me. So, switching gears a little bit. Do you feel that increased direct competition in the space as well as new tests across lung cancer testing continuum potentially be necessary to push some milestones in the space forward such as HEDIS measures or updates to test guidelines?

Yes, Alex, it's a great question. What's been interesting over time is lung has been particularly difficult. We've seen a number of diagnostic competitors enter the space and exit and/or stop. We've got a significant first-mover advantage. We continue to focus on what we can control, putting everything in place to ensure that those patients in dire need are getting the support that they need.

There's a lot of really interesting research ongoing. There have been some introductions on the therapeutic side. None of that hurts. The more awareness that we bring to this, the better off we're going to be. the HEDIS measures getting pushed out was disappointing, but we're still eager to do our part. One of the things that we do know is that when we get broader screening adoption, we're going to identify those patients at high risk at a greater rate. When we do, Nodify testing will benefit and provide strategic value there.

So, we continue to play our part. We feel confident about the offering that we have and the value we're providing. But we're also cheering for those blood-based lung cancer screening tests because we know that those tests will only allow us to provide earlier detection and diagnosis. And again, here we are in November, which is lung cancer awareness month, where we're advocating for awareness and early detection and diagnosis. So yes, we do think that rising tide raises all ships.

Our next question comes from Thomas Flaten with Lake Street Capital Markets.

Robin, would you be willing to quantify the amount of the Medicare Advantage back pay that you got in the third quarter?

We didn't actually get much back pay in the third quarter. It was more that they started paying on new claims. So, there was no unusual amount of revenue in the third quarter from back claims.

So, following on from that, then how sustainable do you think that uptick in ASP is going forward? Do you have a similar uptick in the third quarter of last year? Do we expect it to rebound back down? Or can you help us think about that?

I think third quarter of last year, we did have some back claims, and I think we talked about that in the quarter. I'll be sure to call that out if and when we do collect on back claims so that you can look at sort of a normalized ASP. But what we're seeing is we're seeing consistent payment on those Medicare Advantage claims, and we feel good about that going forward.

Got it. And then of the increase in the guide, it was primarily an upping of the lower end, how much of that is due to the diagnostic revenue versus the services revenue?

It's very heavily tied to the diagnostics revenue that's the lion's share portion of the revenue for the company. And so as that moves, so does the total.

Our next question comes from William Ruby with TD Cowen.

This is William on for Dan. On the adjusted EBITDA positivity, just wondering kind of where your confidence level stands on reaching that in the fourth quarter? And then just what are your views on capital needs over the next few years with your cash where it stands right now?

Yes. We feel pretty confident about reaching adjusted EBITDA positivity in the fourth quarter. With the way we ended the third quarter and the strength going into the fourth quarter, we feel good about that guide. And then on the capital needs front, we feel good about where we are. We're continuing to increase our revenue. We improved our gross margins. We kept our OpEx pretty much flat, and we're continuing to build towards that cash flow breakeven.

So while we did use a little bit of the ATM in the third quarter, partially to offset the increase in AR that we saw, which we noted in the call, we collected that money in the fourth quarter. We continue to drive towards profitability based on the existing business.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Scott for any further remarks.

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

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.