Biodesix - Earnings Call - Q3 2025

Executive Summary

• Q3 delivered a clean beat on revenue with $21.8M (+20% Y/Y) vs S&P Global consensus $21.0M*, driven by Lung Diagnostic Testing volume and pricing and 97% Y/Y growth in Development Services. Revenue consensus: $20.98M*; actual: $21.77M.
• Gross margin expanded 400 bps Y/Y to 81% on mix, higher average revenue per test, and workflow efficiencies; management expects margins to stay near ~80% into year‑end.
• FY25 revenue guidance raised to $84–$86M (from $80–$85M), citing momentum exiting Q3 and early Q4; management reiterated expectation for positive Adjusted EBITDA in Q4.
• Key near‑term catalysts: evidence of primary care channel traction (PCP orders +75% Y/Y; PCP share ~11% in September) and confirmation of Q4 Adjusted EBITDA positivity; longer‑term, pipeline and expanded Bio‑Rad partnership updates at Nov. 12 AMP R&D event.

What Went Well and What Went Wrong

What Went Well

• Primary care expansion is working: “total tests ordered from primary care in the third quarter grew 75% over the third quarter of 2024” and PCP share rose from ~4% pre‑pilot to 11% in September. Management: “our strategic expansion into primary care is proving to be additive”.
• Margin execution: Gross margin reached 81% (+400 bps Y/Y), supported by higher average revenue per test and workflow optimization; CFO sees margins “remain near 80% to finish out the year”.
• Services momentum: Development Services revenue up 97% Y/Y to $1.9M; dollars under contract at $12.9M (+16% Y/Y), an all‑time high.

What Went Wrong

• Operating expense intensity: Operating expenses (ex‑direct costs) rose 10% Y/Y to $24.7M due to sales & marketing for commercial expansion, despite sequential OpEx down 3–4% vs Q2.
• Cash use and working capital: Cash fell to $16.6M (from $20.7M in Q2), primarily from a $5.2M A/R build (timing and higher lung diagnostics revenue); partially offset by $4.8M ATM proceeds.
• Sequential mix headwind in Services: Development Services revenue declined sequentially ($2.1M in Q2 → $1.9M in Q3) even as Y/Y growth was strong; management emphasized growing backlog and new agreements.

Transcript

Speaker 2

Good day, and thank you for standing by. Welcome to the Biodesix Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 11 again. Please be advised today's conference is being recorded. I will now turn the conference over to your speaker today, Chris Brinzey. Please go ahead.

Speaker 1

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.

Speaker 0

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 three 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 three 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 three-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 the third quarter of 2024. 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 the early experience of a four-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 healthcare providers nationwide as we execute our strategy. We have also made significant progress in making it easier for clinicians to order and implement our tests 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, results 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 93-97 reps in the fourth quarter. Next year, we anticipate returning to a cadence of adding approximately six 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 2025. 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 one 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 ISLAC 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 droplet digital PCR 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 12th at the AMP annual meeting in Boston, representatives from Bio-Rad, Thermo Fisher Scientific, and Memorial Sloan Kettering Cancer Center will join a panel led by Dr. Gary Pistono, 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-$86 million. With that, let me turn it over to Robin for 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 teams, one of the largest plans restarted paying for current claims, which contributed to the increase in AFP. 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 of 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 2025. Total SG&A was $21.7 million versus $20.0 million in the third quarter of 2024, 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 93-97 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 tests 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 2025. Adjusted EBITDA, which excludes non-cash and other one-time 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 $84-86 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. We presented data on our existing test 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 that's 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. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 11 again.

We'll pause for a moment while we compile our Q&A roster. Our first question comes from Andrew Brackmann with William Blair. Your line is open. Hey, everyone. This is Maggie Bouillon for Andrew. Thanks for taking our questions. 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? 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. Yeah, thanks, Maggie. Appreciate the question. Yeah, we've highlighted that this is not about us just going out and cold calling on primary care practices. 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.

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. 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. Each and every month, we get a little bit better on that front. As we gain more traction and have additional success, we've got greater confidence. 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.

One of their biggest fears at primary care is that a patient might sit in their practice and they've missed a cancer. In a number of these early adopters on the primary care side, they're starting to track that they're getting earlier diagnosis. We feel confident that long-term, that'll make a significant impact in those patients' lives. We'll look forward to sharing additional data as we have it. Great. Thanks for that color. Maybe just next, I know you have that R&D event next week, so do not want to steal any thunder from that. 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? Yeah, great question, Maggie. 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 Laboratories, Thermo Fisher Scientific, Memorial Sloan Kettering Cancer Center will all be there, so they'll all be participating in our R&D day. What you can expect is really an update on all of the ongoing efforts that we have with them. We will talk a little bit more about our pipeline. 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. Gary Pistono, 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 we'll post that on our website, and others will have the ability to see it. We think partnership. Our partners speak volumes. Knowing that Memorial Sloan Kettering Cancer Center chose us, Bio-Rad Laboratories chose us, and Thermo Fisher Scientific chose us, allowing them the opportunity to share why they chose us, what makes us different, and how that will be meaningful to patients long-term, we think that speaks volumes. We're eager to let them speak. Great. Thanks so much. Thanks, Maggie. One moment for our next question. Our next question comes from Kyle Mikson with Canaccord Genuity. Your line is open. Hi, everyone. This is Alex Dicasse with one for Kyle Mikson. Congrats again on the solid quarter. I guess just taking a step back, we've expanded the sales force from 65 reps in Q1.

Now we're at around 85 in Q3, expecting that 93-97 again for Q4. That's fantastic. Could you just elaborate on the ramp-up, 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? Thanks. Yeah, 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. 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. We feel confident, and we keep striving to get back into that minimum, $1 million per sales rep in terms of sales rep productivity.

We've seen opportunity there to continue to grow and expand that. We are 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 six sales reps per quarter. It'll 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. 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. Thank you very much. One more for me. 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, could potentially be necessary to push some milestones in the space forward, such as HEDIS measures or updates to test guidelines? Thanks. Yeah, Alex, that's a great question. You know 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. We continue to play our part. We feel confident about the offering that we have and the value we're providing.

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. Again, here we are in November, which is Lung Cancer Awareness Month, where we're advocating for awareness and early detection and diagnosis. Yeah, we do think that rising tide raises all ships. Thank you very much. One moment for our next question. Our next question comes from Thomas Flaten with Lake Street Capital Markets. Your line is open. Hey, guys. Thanks for taking the questions. 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. There was no unusual amount of revenue in the third quarter from back claims.

Following on from that, then how sustainable do you think that uptick in ASP is going forward? You had a similar uptick in the third quarter of last year. Were we expected 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. 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. 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. As that moves, so does the total. Awesome. I appreciate it. Thank you. Thanks, Thomas. One moment for our next question. Our next question comes from William Ruby with TD Cowen. Your line is open. Thank you. 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. What are your views on capital needs over the next few years with your cash where it stands right now? Thank you. Yeah. Hi, William. Thanks for listening today. 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.

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. We're continuing to build towards that cash flow breakeven. 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. Got it. Thank you. Thanks, William. 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've 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 healthcare provider customers and our industry partners. I'm truly thankful for your efforts. Thank you. You may now disconnect. Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.