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CareDx, Inc (CDNA) Q2 2019 Earnings Call Transcript

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CareDx, Inc. (NASDAQ: CDNA)
Q2 2019 Earnings Call
Aug. 1, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to CareDx, Inc second-quarter financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press *0 on your telephone keypad. Please note, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. David Clair, Investor Relations. Thank you, sir. You may begin.

David Clair -- Investor Relations

Good afternoon and thank you for joining us today. Earlier today, CareDx released financial results for the quarter ended June 30th, 2019. The release is currently available on the company's website at www.caredx.com. Peter Maag, Chief Executive Officer, and Michael Bell, Chief Financial Officer, will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of 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, expectations regarding coverage decisions, pricing and enrollment matters, and our future financial expectations and results are based upon current estimates and various assumption. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and descriptions of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission.

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The information provided in this conference call speaks only to the live broadcast today, August 1st, 2019. CareDx disclaims any intention or obligation except as required by law, to update or revise any financial projections or other forward-looking statements whether because of new information, future events, or otherwise. This call will also include a discussion of a financial measure that is not calculated in accordance with Generally Accepted Accounting Principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release filed with the SEC.

I will now turn the call over to Peter.

Peter Maag -- Chief Executive Officer

Thanks, David, and good afternoon, everyone. We had yet another exciting quarter at CareDx as we continue to enhance our leadership position in transplantation precision medicine while delivering our fourth consecutive quarter of positive adjusted EBITDA.

This quarter we saw additional proof that our 20-year-long dedication to the field is translating into success on multiple fronts. Firstly, we would like to applaud the efforts of the White House and Department of Health and Human Services Secretary, Alex Azar, for bringing much-needed reform to America's kidney health system. Proposals to improve organ procurement organizations removed this incentive to living kidney donation, ensure patients receive the best dialysis care available and increase the number of available organs for transplantation all represent significant improvements to the current paradigm.

As a patient-centric organization, CareDx is excited about the direction the field is moving in. The administration is clearly aligned with CareDx and its mission to improve the long-term outcome of kidney transplantations. At the recent American Transplant Congress or ATC the presence of CareDx together with the body of evidence on AlloSure, and the bus created by patients, caregivers, and our employees was a fantastic experience. We have become a leader in transplant care with some attendees referring to CareDx as the transplant company.

At ATC, CareDx officially announced its next-generation kidney transplant surveillance solution, KidneyCare. This multi-modality solution combines next-generation sequencing and gene expression technologies with smart, analytical tools to enable precision medicine in transplant clinics. The reception from ATC attendees to CareDx, AlloSure, and KidneyCare was incredibly strong and we saw a noticeable uptick in AlloSure volumes following the event. Before turning to our results for the quarter, I'd like to remind investors of some important metrics regarding AlloSure. Today, we will also provide some information that we are not intending to provide every quarter.

Firstly, our AlloSure surveillance patient attrition rate has and continues to be in the 10% range. This is a metric that we have provided in the past and we are pleased that it continues to track to our internal expectations. Secondly, the majority of our AlloSure patient results come from patients outside of registry studies. In the second quarter of 2019 patient results from K-OAR accounted for less than 15% of CareDx's total revenue. Thirdly, AlloSure's adoption is based on its demonstrated clinical value. Our DART study showed a 95% negative predictive value for active kidney rejection with most of our AlloSure patient results averaging 0.21% healthy DNA level. This strong clinical utility was further validated by data from individual center experience publications and presentations for Cedar Sinai and The University of Colorado.

AlloSure is a tool for clinicians to use in kidney transplant patient's surveillance. AlloSure's value proposition is resonating with our patients and clinicians and is becoming a standard which is evident in the rapid adoption in many centers in the US. And we that, we now turn our attention to our tremendous second-quarter results.

We now report three revenue lines, Testing Services, Products, and Digital. In Testing Services this quarter's AlloSure patient result growth and unique patient tested represent demonstrable proof that we continue to widen our first-mover advantage as we strengthen our platform every day. For the second quarter of 2019, total revenues were $31.5 million, increasing 76% compared to the year-ago quarter. Growth in the quarter was broad-based with Testing Services revenue up 83%, Product revenue up 29%, and Digital revenue primarily coming from our recent other acquisition contributing $1.2 million to the top line.

Turning to numbers on AlloSure, during the second quarter 117 centers provided AlloSure results to their transplant patients. We estimate these 117 centers account for approximately 65% of the transplant volume in the United States. CareDx provided 7,355 AlloSure results in the second quarter to approximately 5,584 kidney transplant patients. I'll repeat that number, 5,584 kidney transplant patients. Since launching AlloSure in October 2017, we have provided results to over 10,000 patient which equate to approximately 5% of the total number of living kidney transplant patients in the US. Demand for AlloSure remains broad and includes both patients who recently received a kidney transplant as well as patients that received their allograft in previous years. We take great pride in providing the highest quality product and services and recognize the importance of quick turnaround time. This patient focus drives everything we do from the ordering process to the blood draw, to providing the results.

We recently set a new benchmark in turnaround time by providing a patient result in less than 20 hours from the time of the blood draw. This is not only optimized for the needs of transplantations, but we believe it is also best in class for sequencing-based testing solutions. Combined with our phlebotomy network at transplant centers and mobile draw partners, this represents another example of our competitive mode. Time to result will ultimately be a CareDx competitive advantage. Our 20-year commitment to transplantation has given the company a better understanding of workflow in transplant centers than anyone in the industry. The CareDx team is committed to constantly push the boundaries, improve our products and services and make a difference in transplant patient lives.

We finished the second quarter of 2019 with 4,628 surveillance patients. We define surveillance patients as patients that are managed by CareDx on a predefined transplant center testing protocol. These 4,618 surveillance patients help build the recurring revenue effect of AlloSure. Note that in the second quarter 1,347 surveillance patients were added to the 3,644 surveillance patients that started the quarter. 373 surveillance patients have standing orders that expired during the quarter and that had been not renewed by the end of the quarter. We define this as attrition which equates to 10% in the quarter.

Overall reimbursement in the second quarter was also consistent with previous quarters with 70% to 80% of our AlloSure volume attributed to Medicare patients.

Medicare reimbursement has been granted through the MolDX program at Palmetto. We believe that AlloSure reimbursement will next be discussed with this group once we report the clinical study outcomes of the initial 1,000 K-OAR patients. These 1,000 patients will be followed for three years. Therefore, we expect this discussion will occur in approximately 2022.

We continue to make progress enrolling centers and patients in K-OAR our Kidney Outcome AlloSure Registry, having surpassed our initial 1,000 patient enrollment goal. As of the end of June 2019, 51 centers have been initiated as care study sites and 1,204 patients had been enrolled. Recall that in the K-OAR study we target 75% adherence to our AlloSure surveillance protocol. Multi-center studies like K-OAR deepen our engagement with the transplant ecosystem as these studies provide us with additional touchpoints with transplant centers and keep us in direct dialogue with the key innovation health and opinion leaders. These studies also drive compliance and adherence to standard protocols which is a crucial element to our work in the transplant community.

Now shifting to heart. Second-quarter 2019 AlloMap testing volume increased 11% year over year, translating into 4,572 patient results. The uptick in the underlying heart transplant volume growth and the adoption of HeartCare through the SHORE registry study accelerated AlloMap volumes in the quarter. HeartCare combining AlloMap And AlloSure-Heart continues to see increased adoption in the transplant community. Caregivers appreciate the comprehensive view of the health of the heart allograft enabled by HeartCare our surveillance HeartCare outcomes registry or SHORE study continues to gain traction with transplant cardiologists and we have recruited 15 centers to date.

Next, we turn attention to our transplant lab products. Our HLA typing products are used in labs throughout the world to help determine which organs or bone marrow are a transplantation match between the donor and the recipient. Our second-quarter product revenue growth was 29% contributing $4.6 million to our revenue in the quarter. Growth was driven by continued traction of TruSight HLA and QTYPE. We remain on track to fortify our product offerings with the introduction of new AlloSeq next-generation sequencing products in 2019. AlloSeq TX for HLA typing, AlloSeq cell-free DNA kits for solid organ transplants, and AlloSeq HCT for bone marrow transplantation.

This quarter we are reporting revenues for our digital business for the first time. With the closing of the OTTR acquisition, CareDx has broadened its footprint. The transaction closed in early May, with the eight weeks under the CareDx umbrella generating $1.1 million in revenues for the quarter. Approximately 50% of our digital business is based on recurring revenues with the remainder being services and one-time license fees. The non-recurring revenue can be a little bit lumpy on a quarter by quarter basis depending on the timing of implementation at transplant centers. A highlight in our digital business this quarter was the Go Live at Dana-Farber Institute which will now manage their bone marrow transplant program with our OTTR patient management software.

A shout out to the team in Omaha doing a great job. The digital team will continue to focus on serving transplant centers with the OTTR suite of software solutions. In addition, we will enhance the workflow solutions for AlloMap and AlloSure in centers with OTTR software. The team will also spearhead our efforts to create a patient engagement platform. And finally, the team will bring our multi-modality testing solutions and a machine-learning algorithm to the transplant clinic under the AiTraC umbrella.

Over the last 20 years, we have been a trailblazer in transplantation developing proprietary clinical biomarkers and successfully navigating the reimbursement landscape. In this next phase of the company, we are setting the care for multi-modality testing, combining our know-how of gene expression and next-generation sequencing-based technology. Our vision is to add smart analytics and machine learning to artificial intelligence in transplant which we call AiTraC. AiTraC will utilize the large clinical data that are collected through our registry studies to provide caregivers with point of care decision-making support tools that allow them to stratify the patient population. With a licensing agreement with Cibiltech and the relationship with Alex Loupy and its team, CareDx has made the first step into providing prognostic information based on artificial intelligence solutions. The iBox information paired with our broad surveillance offering is a way to better stratify patients and the start of the development of care pathways and clinical decision-making tools.

Our vision to provide precision medical tools alongside high-value diagnostics to a complex and costly patient population is just in its beginning. I am extremely proud of the CareDx team and its accomplishments. Novel and innovative technologies like these widen our competitive moat and position CareDx to expand its leadership position going forward.

Consistent with our expectations, you will note that we have accelerated our operating expense levels this quarter. This was driven firstly by our dedication to clinical research and development, to accelerate the experience of transplant centers with our solutions, and to make our solutions available to more patients. On an adjusted annual run-rate basis, we are now spending $25 million on transplant research and development which we consider a tremendous signal of commitment to the field of transplantation. We see very few companies in our space, if any, matching this commitment.

Secondly, we have increased the number of our filed-based clear testing services personnel to 50. This increase will enable us to support transplant centers better than ever and means we are well-positioned versus potential competition. We are excited about expanding our moat.

Mike, I'll hand the call over to you to discuss financials.

Michael Bell -- Chief Financial Officer

Thank you, Peter. Turning first to the income statement, our second-quarter 2019 testing services revenue increased 83% year over year to $25.7 million. The significant growth in testing services revenues was primarily driven by the 7,355 AlloSure patient results we provided in the second quarter. Growth also came from the 4,572 AlloMap patient results we provided which was an 11% increase compared to the prior-year quarter.

Our second-quarter product revenue increased 29% year over year to $4.6 million. With the recent addition of OTTR, our patient engagement model is expanding. Digital and other revenue for the quarter was $1.2 million and we continue to expect our digital business to deliver revenue of $4 million to $5 million in 2019. Total revenue for the second quarter of 2019 was $31.5 million representing a 76% increase compared to the prior year's $17.8 million.

Our gross margins continue to improve year over year. For the second quarter of 2019, the overall gross margin was 63% compared to a gross margin of 60% in the same period of 2018. The non-GAAP gross margin for the quarter was 67% compared to 63% in the prior year quarter. It's worth highlighting that the non-GAAP gross margin for the testing services business for the three months ended June 30, 2019, has improved to 72% compared to 70% in the same period of 2018.

For the second quarter of 2019, the net loss was $7.8 million compared to a net loss of $14.1 million in the same period of 2018. Our net loss per share was $0.19 for the quarter compared to a loss of $0.40 per share in the second quarter of 2018. Our second-quarter 2019 net loss included a $5 million stop base compensation expense and a $1.4 million loss from the change in estimated fair value of common stock bond liabilities.

For the second-quarter 2019, our non-GAAP net loss was $0.1 million compared to a non-GAAP net loss of $1.3 million in the same period of 2018. Our non-GAAP net loss per share was $0.00 for the quarter compared to a non-GAAP net loss per share of $0.04 in the second quarter of 2018.

As a reminder, we define adjusted EBITDA as non-GAAP net income before interest, income tax, depreciation, amortization, and other expense. For the second quarter of 2019, adjusted EBITDA was a gain of $0.1 million compared to a loss of $0.8 million in the second quarter of 2018. This marks our fourth consecutive quarter where we had positive adjusted EBITDA. As Peter mentioned earlier and as we indicated in our last earnings call, we increased our operating expenditures in the second quarter of 2019 to further enhance our leadership position in transplantation.

Operating expenses in the quarter reflect our fully expanded testing services field-based team, our significant presence at major trade conferences such as ATC and EFPI, our continued investment in clinical studies such K-OAR and SHORE, and our new focus on digital through the acquisition of OTTR. We expect our operating expenses will modestly increase in future quarters as we continue to build a platform for future growth.

Cash and cash equivalency at June 30, 2019, were $43.5 million compared to $57.4 million at the start of the quarter. The movement in cash in the quarter included $60 million for the OTTR acquisition. Net operating cash flow was positive $3.6 million in the second quarter of 2019. We continue to expect positive operating cash flow for the full-year 2019.

Turning to guidance, we are updating our 2019 revenue expectations to reflect the continued growth of our business and anticipate $123 million to $125 million for the year. As a reminder, this includes $4 million to $5 million from the OTTR acquisition which closed in May of this year.

With that, I will open the call for questions.

Questions and Answers:

Operator

Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * key. One moment please while we pause for questions.

Our first question comes from the line of Bill Quirk with Piper Jaffray. Proceed with your question.

Bill Quirk -- Piper Jaffray -- Analyst

Great. Thank you and good afternoon, everyone.

Peter Maag -- Chief Executive Officer

Good afternoon, Bill. How are you doing?

Bill Quirk -- Piper Jaffray -- Analyst

Good, good. A couple of question, I guess. First, could we start off on guidance, Mike? Peter made the comment that you're seeing some increased volumes coming out of ATC and certainly you're moving your guidance up above the beat as well as the addition of OTTR certainly would suggest that you've seen a nice follow through on that strength here early in the third. Is that kind of the right read through here?

Michael Bell -- Chief Financial Officer

Yes, Bill. We've seen a nice follow through and with the results of the second quarter, yeah. We've increased our revenue guidance by $10 million compared with the previous guidance. So, we're still guiding for continued growth sequentially through the rest of the year.

Bill Quirk -- Piper Jaffray -- Analyst

Perfect. And then, I guess a question for Peter. Peter, how should we think about timing on the KidneyCare data? Certainly, there was a lot of excitement at the recent conference but I think some of the physicians admitted that obviously, they want to see the data follow through. So, when should we be expecting that?

Peter Maag -- Chief Executive Officer

Thank you very much. Excellent question, Bill. Obviously, KidneyCare comprised of AlloSure, on the one hand, our cell-free DNA test, and then AlloMap Kidney which is a gene expression profiling technology. And then the third is this prognostic element of iBox. Ad the company has always done, we are launching this through a clinical registry study on the observational drive, making sure that our customers and our clinicians that are working with the solution have a framework to engage patients and understand how to provide that information. While AlloSure is a validated lab test, then AlloMap Kidney and iBox are still in a phase of rapid development as we gain more and more information. So, we will really make that available probably in the second half of this year. We're shooting for the third quarter in making that available through an OKRA study which will be another landmark trial that the company is engaging in.

Bill Quirk -- Piper Jaffray -- Analyst

Got it. The last question for me is as it relates to the recent activities by the current administration to increase both access to kidney transplant, improved dialysis, etcetera. How should we be thinking about the practical implications and/or timing? It certainly strikes us that any and all efforts to try to get additional kidneys into the donation pool are obviously going to find recipients given the waitlist. But how close are you to some of those activities and how quickly do you think those could start to have a meaningful impact on the number of kidney transplants each year? Thank you.

Peter Maag -- Chief Executive Officer

Thanks for the question. In the seven years when I joined CareDx and we built this focus on transplantation, if one would have said that the President and the Head of Health and Human Services would be on the podium and announcing a strengthening of transplantation, nobody would have expected that. So, this focus on transplantation is completely in line with what we've been seeing and the opportunity that we've been seeing. We see that this is an absolute confirmation about the medical need, and then also the market potential that we see which we have been estimating at $2 billion and beyond. So, in that sense, this will be a mid to long-term increase in transplantation. We do hope that even next year we already see an acceleration of available organs by making sure that the organ procurement organizations are being more effective in making sure to make organs available.

If we were to apply the rules that are happening for example in France onto the American organ population, we would be seeing an increase of about 3,000 organs which would be a 15% increase in our current organ availability. So, yes. There are very tangible things that we see happening and currently, we're growing about mid-single-digit on our kidneys organ. I think that could be doubling by next year. So, a 15% organ growth for next year is more than possible.

Bill Quirk -- Piper Jaffray -- Analyst

Very good. Thanks, guys.

Operator

Our next question comes from the line of Brandon Couillard with Jefferies. Proceed with your question.

Brandon Couillard -- Jefferies -- Analyst

Thanks. Good afternoon. Peter, I appreciate all the detail around the attrition rate figures in the period. I think that pretty much put that question to bed. I want to focus on the number of ordering AlloSure centers in the period. You've kind of been flatlining the last few quarters at around 100. It spiked up to 117 this period. Can you sort of speak to the drivers of that?

Peter Maag -- Chief Executive Officer

Brandon, thank you very much. This follows exactly our strategy where we had said for this year it's all about going deep into the individual center, making sure that we are part of the workflow. We do place the protocols and are very strong in converting K-OAR centers into regular ordering centers. So, our goal was not to increase the hundred centers at the beginning of the year. Our goal was to go deep in these hundred centers. So, 117 I think is a testimony to the great reception we had ATC. We see that as a nice increase but really the success that you see in our launch strategy is that we're going deep and have more patients per center where we are exactingly present and going deep in these centers is very positive. This number, 117, is a great number because it's the number of ordering centers in a quarter. That might notch up a little bit. But really what I'm focused on is how can we grow the high-volume target centers that are within that 117.

Brandon Couillard -- Jefferies -- Analyst

Thanks. More broadly, could you sort of speak to some of the initiatives you're working on internally to improve the compliance and the adherence rate for AlloSure patients?

Peter Maag -- Chief Executive Officer

I think one of the most exciting elements that we have added to our field-team is the patient care managers. We are now engaged in supporting transplant centers in managing these patients longitudinally. Initially, we helped these centers by just making sure that patients get their blood draw scheduled and are coming back to the center in their regular surveillance interval. We have seen that this compliance and adherence is a key challenge in a center because tertiary care centers in the US are not well-equipped to have longitudinal patient care management. CareDx can really make a significant contribution in that because this better surveillance will lead to a better outcome. So, having patient care managers that directly interact with these patients is very, very valuable. We believe that we can impact adherence and compliance.

Today, in a way this is low-hanging fruit because compliance and adherence we talked about is probably 70% to 80% on our K-OAR patient population and only about in the 60% range in our surveillance patient population outside of K-OAR. So, this could be a significant value driver also long-term as we continue to increase patient penetration.

Brandon Couillard -- Jefferies -- Analyst

Excellent. A two-part question for Mike. The first on the guidance for the year, you've put up double-digit growth for AlloMap through the first half of the year. Are you still thinking that mid-single digits for the full year? And then secondly, could you speak to the account receivable jump in the second quarter? Thanks.

Michael Bell -- Chief Financial Officer

Yes. Firstly, Brandon, on AlloMap, yes. I think over the last two quarters now we've seen the AlloMap growth be in the sort of 10%, 11% range. Some of that increase is coming from the driver of SHORE being rolled out. So, I think we're looking at the remainder of the year to probably continue around this 10%, low double-digit growth for 2019.

With respect to the AR, the biggest impact on that was that we added the OTTR acquisition. So, that added something like about $2.5 million in accounts receivable. The rest of it is just coming from the growth on the testing services business as we ramp of the revenue. It is obviously increasing the AR.

Brandon Couillard -- Jefferies -- Analyst

Very good. Thank you.

Operator

Our next question comes from the line of Per Ostlund from Craig-Hallum Capital. Proceed with your question.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Thanks. Good afternoon, guys. I wanted to follow up, Peter, on your answer to one of Bill's questions about KidneyCare and the upcoming rollout and launch. As you're thinking about building your registry, can you give us a little bit of handle on what you're thinking in terms of size and scope of an OKRA study versus K-OAR? Are you thinking of similar size, patient cohort, center count, etcetera? How much can you piggyback seamlessly on the infrastructure of the K-OAR study in terms of IRBs and that sort of thing to really smooth the start of the trial?

Peter Maag -- Chief Executive Officer

Thank you very much for the question. I think in terms of the details of the OKRA study, we'll be shortly announcing the details of the OKRA study. I think we as a company tend to speak about these trials when we have a first patient, first visit enrolled. That has been common practice at CareDx. We always want to talk about things once we have them ready and launched. In the sense of how to think about it in broad strokes, think about it as an extension of K-OAR. Think about it as a K-OAR 2 in a way of the same type of magnitude of trials. That should give you some kind of a data point. It will be 1,000 or more patients and it will be three-year follow up, and it will be accompanied with all the toolsets that we have in the company to make sure that we have a data repository that allows us to do not only iBox, AlloMap, and AlloSure, but also build a basis for AiTraC where we're trying to go toward the next step of having smart analytical solutions based on machine learning and artificial intelligence.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Very good. And since you mentioned OTTR as well, if we could come back to that. It sounds like in terms of the revenue contribution that's very much tracking against expectations. From the electronic medical record standpoint, how are you seeing that rollout? What should we be thinking of in terms of timelines for you being integrated with OTTR centers?

Peter Maag -- Chief Executive Officer

The team is doing a fabulous job on this. That is also a few weeks into the acquisition. I think we have launched now the initiatives. The team is working night and day. I think on the next earnings call we will be able to update on how good we are on seeing not only the ability to integrate this into the OTTR system but also provide those solutions at those centers where OTTR has been used, even that are using the EPIC platform. So, I think we'll be able to probably in three-months' time to be able to talk about our electronic medical records. In general, being part of the electronic medical records will widen our moat and we see that as a possible opportunity for us to accelerate our moat building in transplantation.

Per Ostlund -- Craig-Hallum Capital -- Analyst

Very good. Thank you, Peter.

Operator

Our next question comes from the line of John Hsu with Raymond James. Proceed with your question.

John Hsu -- Raymond James -- Analyst

Good afternoon.

Peter Maag -- Chief Executive Officer

Hey, John. How are you doing?

John Hsu -- Raymond James -- Analyst

Doing well. Thanks, Peter. If we could just go back to the guidance for a second. I just want to be clear. I believe the last time you provided guidance the $4 million to $5 million for OTTR software was already included. So, the improvement is roughly $10 million dollars. Can you just help us think about the different pieces that are driving that between AlloSure as well as transplant products and then also AlloMap?

Michael Bell -- Chief Financial Officer

Yeah, John. It's Mike here. Yes. In the previous guidance, which was $113 million to $115 million, that included the $4 million to $5 million for OTTR. That stays consistent in the revised guidance. Again, in the previous guidance, we'd been talking about product growth for the full year being around the 20% mark. That stays the same. So, the difference in guidance is coming from AlloMap and again we've said the growth now we're seeing is this 10% to 11%. That's probably going to continue for the rest of the year. And then the remainder of the growth, obviously then, coming from AlloSure and the continued traction there.

John Hsu -- Raymond James -- Analyst

Okay. Great. Thanks for that. And then just looking at a couple of metrics that you provided. It looks like surveillance patients seem to actually accelerate quarter on quarter and yet the number of K-OAR patients actually decelerated. It would seem that even outside of K-OAR that you are actually driving an acceleration in kidney. Can you just speak to some of the trends that you're seeing there in terms of surveillance patients being added?

Peter Maag -- Chief Executive Officer

Yeah, John. I think you're really picking up on the most important number when we look at our metrics. The one number that we focus on is the surveillance patients. And you know, you're mentioning it's slowing. There are still 200 K-OAR patients added which is nice. But really the thousand patients, and so that would be 800 additional patients outside of K-OAR, being added onto the quarter that's really the excitement in the organization because that is supporting our flywheel concept of patients that we care for longitudinally. And we are able to potentially improve the long-term outcome of these patients by better monitoring. So, this 4,618 I think is a phenomenal number for us. The team has done a great, great job and I think it speaks testimony to that we have moved way beyond K-OAR already in patient adoption and clinician acceptance of the test. Besides the 117 centers, which I think is strong, the 4,618 surveillance patients is really the very exciting number on our metrics.

John Hsu -- Raymond James -- Analyst

Okay. Great. The last one for me. You obviously have a lot of irons in the fire and great momentum in the current business. But if we had to think about timing on reimbursement pathways for maybe a couple of products and I'll just through them out there, for HeartCare, if there is some potential incremental reimbursement down the line, or for AlloSure in lung. If you could just provide us any update as far as your thoughts on how those might be progressing? Thank you.

Peter Maag -- Chief Executive Officer

No. I think we've been always talking about that we're progressing those on reimbursement. I think we have very strong validation data. We have publications for example on HeartCare that will drive the clinical validation of the combination of gene expression profiling and cell-free DNA. I think in the past when talking about additional upsides we always said we were actually happy if we continue to stay at the current AlloMap reimbursement rate. We do see an opportunity for potentially increasing the reimbursement side there as well. So, we have not had an in-depth discussion with MolDX that we would go through that route as well on these products. I think as this will unfold, we will update you on the progression. But I think in terms of guidance, I would keep to the current reimbursement levels of these two products. And we spit out 2022 for AlloSure. I think it puts a marker on how to think about our continuous reimbursement level.

John Hsu -- Raymond James -- Analyst

Okay. Fair enough. Thank you so much.

Peter Maag -- Chief Executive Officer

Thank you, John.

Operator

As a reminder, if you would like to ask a question, please press *1 on your telephone keypad.

Our next question comes from the line of Yi Chen with HC Wainwright. Proceed with your question.

Yi Chen -- H.C. Wainwright -- Analyst

Thank you for taking my question. Looking at the test volume of AlloSure divided by the kidney transplant patients, the test per patient remains at 1.3 for the first and second quarter. Is there any chance that this number can go up during the remainder of 2019? Or this number will remain relatively static?

Michael Bell -- Chief Financial Officer

Hi, Yi. This is Mike here. I think at the moment with the trends we're seeing with respect to the patients that are on surveillance and the adherence rate for K-OAR and for the non-K-OAR surveillance patients, then probably this rate 1.2, 1.3 is probably going to stay consistent for the remainder of the year. Unless that mix of surveillance patients to non-surveillance patients was to change.

Yi Chen -- H.C. Wainwright -- Analyst

Okay. Thanks. And also, I noticed that for the second quarter there is an increase in R&D and in sales and marketing expenses. Do you think the increase in the test volume order top-line revenue is in proportion to the increase in these operating expenses?

Michael Bell -- Chief Financial Officer

I think we did have an acceleration of operating expense this quarter. I talked about it earlier being related to expanding the field. Now we have 50 people, the studies that we're doing. We had expense related to the trade conferences and our large presence at those conferences this quarter. And then, of course, there was the addition of OTTR. So, we did see a bump up. I think I mentioned we'll continue to increase the operating expense but probably won't see it bump up like that for the remainder of the year. I think the operating expense growth will slow down for the remainder of 2019.

Yi Chen -- H.C. Wainwright -- Analyst

Thank you.

Operator

There are no further questions left in the queue. I would like to turn the call back over to management for any closing remarks.

Peter Maag -- Chief Executive Officer

Thank you very much for joining the call as we are building an exciting transplantation business. Thank you very much for your interest. Goodbye.

Operator

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Duration: 43 minutes

Call participants:

David Clair -- Investor Relations

Peter Maag -- Chief Executive Officer

Michael Bell -- Chief Financial Officer

Bill Quirk -- Piper Jaffray -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Per Ostlund -- Craig-Hallum Capital -- Analyst

John Hsu -- Raymond James -- Analyst

Yi Chen -- H.C. Wainwright -- Analyst

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