Welcome to the CareDx First Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we’ll hold a Q&A session to ask questions at that time. [Operator Instructions] As a reminder, this conference call is being recorded today May 6, 2016. I would now like to turn the conference call over to Mark Klausner, Investor Relations. Please go ahead.

Thank you for participating in today’s call. Joining me from CareDx are Peter Maag, President and Chief Executive Officer; and Charles Constanti, Chief Financial Officer. Earlier today, CareDx released financial statements for the quarter ended March 31, 2016. The release is currently available on the company’s website, www.caredx.com. Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, our examination of historical operating trends and our future financial expectations are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. CareDx disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast today, May 6, 2016. In addition, on today’s call, we will refer to various non-GAAP financial measures in which we exclude certain items from our US GAAP financial results. We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to review these measures as a supplement to financial performance measures determined in accordance with US GAAP. Please refer to today’s press release announcing our first quarter 2016 results for a reconciliation of these non-GAAP performance measures to our US GAAP financial results. I will now turn the call over to Peter.

Thanks, Mark. Good morning everyone. I would like to begin with a patient-focused snippet as we do on all of our calls. As we are expanding our reach into the pre-transplant arena, we can’t tell, but be sensitive to all information around the pre-to post-transplant continuum. The availability of donors continues to be the key challenge in transplantation. According to the National Kidney Foundation, in January this year, there are 122,000 people waiting for life-saving organ transplant in the US alone. Of these, 100,000 await kidney transplants. The median wait time for an individual’s first kidney transplant is 3.6 years. I think it goes out to everybody that agrees to be an organ donor. I am now going to provide a summary of our recent highlights, then update you on our clinical initiatives. I’ll then ask Charles to dive deeper into the financials for the first quarter and our guidance for 2016. And then we look forward to your questions. Along our vision to build a transplantation-focused diagnostic company, we drive our strategy through three objectives: buildout presence and expertise through our core product AlloMap and Olerup SSP; create growth momentum through our launch products AlloSure and QTYPE; and accelerate further through product menu expansions and innovative patient management initiatives. In the first quarter, we provided approximately 3,400 AlloMap patients’ results. North American AlloMap test patients results volume grew 10% quarter over the previous year and on a global basis, which includes the results from our Strasbourg Lab grew 8% over the prior year. Going forward, we intend to primarily report on North American volume growth. We continue to be pleased with the underlying trends in testing. Revenue of $6.6 million was flat versus the fourth quarter, reflecting a continued lag in collections. I am disappointed about the conversion of…

Thank you Peter, we completed the acquisition of Allenex on April 14. In Q2, we will consolidate and include Allenex from that date going forward. The Q1 2016 results that we are discussing today are CareDx on its own. Starting with revenue, in the first quarter, revenue was $6.6 million, down 9% from the first quarter of 2015. AlloMap test volumes grew 8% year over year, while test volume was up to related AlloMap revenue is down year over year and sequentially from the fourth quarter of 2015. This is a similar trend to the results we reported in Q4, 2015. A continued delay in collections has impacted Q1 revenue recognized on a cash basis. This slowdown in collection momentum came about when we transitioned collections in-house from an outsourced model in the second half of last year. We have also seen some slowdown in collections from commercial payers related to the transition from a miscellaneous code to our CPT code. To increase collections momentum, we are in the process of bringing in a team of trained temporary collections people. We are also adding new hires to the collection team. Collections are top priority. Cost of testing in the first quarter was $2.8 million, compared to $2.7 million in the first quarter of 2015, an increase of 2.3%. R&D expense was $3.2 million in the first quarter, compared to $1.4 million in the first quarter of 2015. Higher R&D expenses were expected as we continue to develop our cell-free DNA program that ramped up last year. Sales and marketing expenses for the first quarter were $1.7 million, compared to $2 million in the prior year and the decrease reflects a reduction in discretionary marketing spending. G&A expenses were $5.7 million in the quarter, an increase of $3 million from $2.7…

In the beginning of 2016, we've built a lot of momentum at CareDx. We are now a combined company and organization that’s brought together great talent, great products and great ideas. We believe that with the clinical application of genomic information and the focus on a patient centric longitudinal view on outcomes, we will make a significant contribution to a medical field with continued great unmet need. With that, we’d now like to open the call up to questions. Operator?

[Operator Instructions] And our first question comes from the line of Bill Quirk from Piper Jaffray. Your line is now open.

Great. Thanks and good morning, everyone. I guess first question is just help us think a little bit about some of the changes that you have put in place with respect to the internal collections department, Peter, thank you for detailing some of the changes there. Do you have a timeline for when we might start to see your reported revenue kind of more closely follow the overall volume for AlloMap?

Bill, thank you so much for the question. Collections is a top priority and I’m very glad that Charles has come on board and make that a priority for the organization. This will take some time. This is not going to be happening within a quarter or so. I think we will see working through that backlog all the way up to until the end of the year. Charles, did you want to give more color?

Yes. So I would say two principal areas where we will focus and we are focusing directly and that’s, one is having the group appropriately staffed and we do need, I’m going to say, an immediate ramp at least for some period of time in order to really gain momentum on the catch-up of collections and secondarily go deeper and I want to say the 80-20 rule of being very focused on those accounts where they are going to generate the most cash quickly and bring focus to more rapid delivery. As Peter mentioned, it will take some time to clear all the backlog or catch up with the collections, but I feel confident that we haven’t seen things that are indicative that these are uncollectible amounts, so it’s a matter of now really getting down and delivering and collecting on the cash.

Okay, understood. And then presumably one of the longer term reasons for bringing your billings department in-house is that you have some leverage here over time, although obviously you have some incremental cost here in the near term, so can you help us just think about kind of the yin and the yang here of what the additional spend might be versus what some of the longer term P&L benefits would be.

Yes, there is a year-over-year impact of bringing it in-house. The cost of the group is several hundred thousand or so dollars. The cost of the hedge are not really particularly high cost per person cost, so they will all see some short term increment in the cost, but I don’t think it will be particularly significant to our results.

And long term strategically, Bill, that’s absolutely correct that we believe with the launch of AlloSure and having other products coming down the pipeline to have control over that billing and collection process links together with the reimbursement process with the Managed Care contracting providers is absolutely a strategic component in being a successful molecular diagnostic test. I would consider this right now the ripples of a handover which has been going on for way too long, but with Charles being onboard now and the focus of the organization making collection is a top priority. I feel good about our plans going forward.

Okay, very good. And then just a competitive question, if I may. How are you thinking about the competitive dynamic within kidney? Obviously there is another molecular company out there, it looks like they have had a little bit of success in terms of getting some of the transplant centers into kind of beta user-ship or clinical trial user-ship and so just maybe help us think a little bit about the competitive dynamics. Thank you.

Bill, I welcome competition. I think this is one of the problems of AlloMap always has been that we are the single and sole product. So I think let the best solution win. I think we have an amazing clinical trial ongoing with the DART study in 14 leading kidney transplant centers. We are collecting samples and events that is hard to replicate. This will build the foundation for the organization of having clinical samples together, having blood samples together with clinical results, well annotated sample sets. So we can use this basis for providing future surveillance solution. But this field is attractive and it will attract others to be operating in that field which we see just a confirmation of our strategy of focusing on the highest cost patient in the healthcare system and providing surveillance solutions that is driving better outcomes. So I think this is just a confirmation of our strategy that we see other companies also thinking about entering the field.

Got it. Thanks guys.

Thank you. Our next question comes from the line of Dan Leonard from Leerink Partners. Your line is now open.

Thank you. Peter, could you give us any update on your discussions with Medicare on AlloSure and whether or not you still think there might be any path for you to get paid for AlloSure under some sort of a coverage with evidence development program prior to the Roche results reading out?

Dan, thank you very much. I think that’s an excellent question. We have an amazing foundation of data already today based on the heart data, based on the initial kidney data, but the reimbursement discussion with Palmetto will be really centered around the initial first analysis of DART. I think that is very critical for us to achieve a conversation with them around coverage and the data development. We think that this coverage under data development program is well suited for AllSure because it is somewhat defined patient population with a long term focus on improvement of outcomes which really aligns the objective of the coverage under data development program together with the objectives of the company. So I am very positive that we have an open ear here. On the other hand it will focus on the quality of the clinical results of the first analysis on DART and I think as soon as we have that we will further engage with Palmetto.

Okay, got it. And then my follow-up question, can you talk about the growth rates between those 41 centers that have adapted to the AlloMap variability score. Are they meaningfully different in terms of AlloMap volume growth versus those who haven’t? Is there any distinction to be noticed there and anything to learning from that?

Dan, that’s a great question. I think what we are is that having that established and keep in mind that we only launched this in October and so the patients that are under the AlloMap variability score will typically since they are one to two years post-transplant will have received one or two AlloMap scores or AlloMap variability scores. So we are still early in the adoption. What we have learned in these 41 centers that protocol adherence is absolutely the key for driving further AlloMap utilization and AlloMap variability gives us this opportunity to go back into the center and engage with them and saying why do you not get AlloMap variability scores because you haven’t adhered to the frequency in order to get the variability score. So this is a great engagement tool. We do see a slight uptick in the centers, but I don’t think that commenting on it yet would be - it’s just too early for us to really make a correlation.

Okay, understood. Thank you.

That concludes our question-and-answer session. Now I will turn the call back over to Peter Maag for closing remarks.

Well, thank you very much for joining us today. I very much appreciate your time and having a good Friday. Thank you.