UBS Global Healthcare Conference - BIODESIX INC

Financial Performance:

• Q3 diagnostic testing revenue reached $23 million, reflecting 16% year-over-year growth, while test volume increased 24% to 19,400 units.
• Full-year revenue guidance remains at approximately $100 million, representing a midpoint growth rate of 15%.
• Gross margins have remained robust for six consecutive quarters at above 80%, despite a strategic mix shift toward the lower-priced CDT test which reduced the overall Average Selling Price (ASP).
• Private payer rates and Medicare reimbursement levels have been successfully maintained through health economics data, even as individual test collection dynamics improved.
• Biopharma services backlog is strong but timing delays in the fourth quarter due to contract execution and study accruals contributed to the revenue shortfall.

Guidance and Future Outlook:

• Management targets profitability by the end of 2025, driven primarily by top-line revenue growth and increased sales team productivity.
• The company plans to scale the sales force to a peak of roughly 115 representatives by year-end, with a sustained hiring cadence of 6–8 new reps per quarter to optimize training and retention.
• Digital diagnostic product (radiomics-based) targeting commercialization in 2028 as a complementary asset to the current blood-based portfolio.
• Full recovery and re-establishment of growth momentum are projected to materialize in 2027, with expectations of a "banner year" driven by ramped-up sales teams and new data releases.

Business Segments and Product Lines:

• Notify Lung (Blood-based): The core portfolio includes CDT (identifies likely malignancy in nodules 4–8mm) and XL2 (identifies likely benign nodules 8–30mm), addressing an estimated 5–6 million US patients with incidental nodules annually.
• Primary Care Channel: Now accounts for 15% of patient volume despite representing 50% of the total market; sales teams are adapting to lower primary care visit rates compared to specialists.
• Digital Diagnostics: A radiomics-based lung nodule risk assessment in partnership with Vanderbilt is in development, expected to commercialize in 2028; the "Stratify" study is currently validating its clinical utility alongside current tests.
• MRD Programs: Partnerships established for distributed tests: a tumor-informed assay with BioRad and a tumor-naive methylation assay with Thermo Fisher, validated by Memorial Sloan Kettering.
• Strategic Partnerships: The company is leveraging partners for MRD and digital development to avoid building a massive independent oncology sales force.

Market and Competitive Landscape:

• The total addressable market for incidental lung nodules has expanded significantly to 5–6 million annual US cases, up from older estimates of 1.6 million.
• The American College of Chest Physicians (CHEST) recently endorsed a structured framework for nodule management programs that explicitly includes biomarkers like Notify, a significant step toward formal guideline inclusion.
• Management acknowledges that formal guideline updates are delayed (potentially Q1/Q2 2027) due to bureaucratic processes rather than a lack of evidence.
• Health systems and integrated networks are increasingly viewing the tests as economic solutions to reduce unnecessary interventions and catch cancers earlier, creating a different purchasing dynamic compared to private practices.

Risks and Challenges:

• Seasonality: Greater-than-expected seasonality in the primary care channel, where patients are more willing to delay appointments than those visiting specialists.
• Sales Capacity: A temporary reduction in sales headcount in Q3 impacted growth; while October showed the strongest new physician acquisition of the year, the ramp-up of new reps takes 2–3 quarters to reach full productivity.
• Reimbursement Mix: A shift in product mix toward the lower-priced CDT test negatively impacts Average Selling Price (ASP), though margins remain protected.
• Sales Efficiency: The transition from high-touch manual ordering to programmatic, automated ordering within health systems requires significant implementation time.

Management Commentary and Tone:

• The tone was confident and resilient, framing the Q3 miss as a transitory issue resulting from specific operational adjustments and market dynamics rather than a structural failure.
• Management expressed high optimism regarding the "halo effect" of CDT on XL2 ordering and the potential for programmatic ordering to scale efficiency.
• Confidence was placed in the "Diagnostic Cortex" AI platform and the unique data moat provided by the Stratify study to support future digital diagnostic development.
• Leadership emphasized a balanced approach to growth and profitability, prioritizing revenue generation to fund the path to self-sufficiency without excessive capital expenditure.

Analyst Questions and Answers:

• Q: Was the Q3 shortfall permanent? A: No, management cited improvements in October, including strongest new physician acquisition and improved ordering patterns, indicating a rebound.
• Q: How do primary care dynamics differ from pulmonology? A: Pulmonologists make procedural decisions (biopsy), while primary care physicians focus on retention vs. referral; however, the value proposition is resonating, evidenced by early-stage cancer detections in primary care.
• Q: What is the timeline for digital diagnostics commercialization? A: Targeted for 2028, with first platform data expected at RSNA and publication of the Stratify study following shortly after.
• Q: How are health system economics different? A: Integrated networks prioritize reducing unnecessary care and missing cancers; the tests help align incentives for both outcomes, supporting strong pricing power.
• Q: What metrics define success for 2027? A: Key metrics include total sales headcount (targeting ~115), tests per rep (productivity), and successful data/timing announcements for new tests.

Other Key Points:

• The "Stratify" study aims to create the largest database of multimodal data (blood and CT scans) to support AI-driven discovery of new diagnostic tests.
• The company is exploring data monetization opportunities with biopharma partners, leveraging its rich dataset of tokenized samples and clinical information.
• CHEST's new framework is expected to facilitate "programmatic" ordering, reducing reliance on manual processes and enabling software-driven patient identification.
• The sales organization is optimizing for distinct roles ("retention-focused" vs. "hunter-like") to maximize territory performance.
• Management expects the Q4 biopharma services performance to reflect the strong backlog, though revenue timing may be pushed out.