CareDx Inc

Previous wording

•Ended the quarter with cash, cash equivalents, and marketable securities of approximately $216 million, with no debt.

Current wording

•Generated $18.9 million cash from operations. Ended the quarter with cash, cash equivalents, and marketable securities of approximately $228.9 million, with no debt.

Previous wording

•SHORE data presented at ISHLT demonstrated that HeartCare® multimodal testing outperforms donor-derived cell-free DNA (dd-cfDNA) testing alone in identifying allograft rejection.

Current wording

•Published SHORE study data demonstrating that HeartCare® outperforms dd-cfDNA alone in identifying allograft rejection.

Previous wording

Since the analytical validation paper in the Journal of Molecular Diagnostics in 2016, there has been an increasing body of evidence supporting the use of AlloSure Kidney dd-cfDNA in the assessment and surveillance of kidney transplants. Most recently, its utility in the assessment of clinical and sub-clinical rejection, was evaluated in over 1,000 patients and published in Kidney International.

Current wording

Since the analytical validation paper in the Journal of Molecular Diagnostics in 2016, there has been an increasing body of evidence supporting the use of AlloSure Kidney dd-cfDNA in the assessment and surveillance of kidney transplants. In June 2024, a publication in the high-impact journal Nature Medicine described the ability of AlloSure to predict rejection in numerous scenarios including subclinical rejection in stable patients. This same publication demonstrated the correlation with severity of rejection and also showed the value of use in surveillance for rejection in patients with multiple AlloSure tests.

Previous wording

Heart. Noridian issued a parallel coverage policy granting coverage for AlloSure Heart when used in conjunction with AlloMap Heart, which became effective in December 2020. In 2021, Palmetto and Noridian issued coverage policies written by MolDX to replace the former product-specific policies. The common policy LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian). The Medicare reimbursement rate for AlloSure Heart is currently$2,753. AlloMap Heart has received positive coverage decisions for reimbursement from many of the largest U.S. private payers.

Current wording

AlloMap Heart has been a covered service for Medicare beneficiaries since January 1, 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart. Noridian issued a parallel coverage policy granting coverage for AlloSure Heart when used in conjunction with AlloMap Heart, which became effective in December 2020. In 2021, Palmetto and Noridian issued coverage policies written by MolDX to replace the former product-specific policies. The common policy LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian). The Medicare reimbursement rate for AlloSure Heart is currently $2,753. AlloMap Heart has received positive coverage decisions for reimbursement from many of the largest U.S. private payers.

Previous wording

Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests, which represented 75% of our total revenue for the three months ended March 31, 2024 and 80% of our total revenue for the three months ended March 31, 2023. Our testing services revenue depends on a number of factors, including (i) the number of tests performed; (ii) establishment of coverage policies by third-party insurers and government payers; (iii) our ability to collect from payers with whom we do not have positive coverage determination, which often requires that we pursue a case-by-case appeals process; (iv) our ability to recognize revenues on tests billed prior to the establishment of reimbursement policies, contracts or payment histories; and (v) how quickly we can successfully commercialize new product offerings.

Current wording

Our testing services revenue is primarily derived from AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests, which represented 77% and 76% of our total revenue for the three and six months ended June 30, 2024, respectively, and 76% and 78% of our total revenue for the three and six months ended June 30, 2023, respectively. Our testing services revenue depends on a number of factors, including (i) the number of tests performed; (ii) establishment of coverage policies by third-party insurers and government payers; (iii) our ability to collect from payers with whom we do not have positive coverage determination, which often requires that we pursue a case-by-case appeals process; (iv) our ability to recognize revenues on tests billed prior to the establishment of reimbursement policies, contracts or payment histories; and (v) how quickly we can successfully commercialize new product offerings.

Previous wording

Our product revenue is derived primarily from sales of AlloSeq Tx, Olerup SSP and QTYPE products. Product revenue represented 12% of our total revenue for the three months ended March 31, 2024 and 9% of our total revenue for the three months ended March 31, 2023. We recognize product revenue from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. We generally have a contract or a purchase order from a customer with the specified required terms of order, including the number of products ordered. Transaction prices are determinable and products are delivered and risk of loss passed to the customer upon either shipping or delivery, as per the terms of the agreement. There are no further performance obligations related to a contract and revenue is recognized at the point of delivery consistent with the terms of the contract or purchase order.

Current wording

Our product revenue is primarily derived from sales of AlloSeq Tx, Olerup SSP and QTYPE products. Product revenue represented 11% and 12% of our total revenue for the three and six months ended June 30, 2024, respectively, and 11% and 10% of our total revenue for the three and six months ended June 30, 2023. We recognize product revenue from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. We generally have a contract or a purchase order from a customer with the specified required terms of order, including the number of products ordered. Transaction prices are determinable in the contract. The products are delivered and risk of loss passed to the customer upon either shipping or delivery, as per the terms of the agreement. There are no further performance obligations related to a contract and revenue is recognized at the point of delivery consistent with the terms of the contract or purchase order.

Previous wording

Our patient and digital solutions revenue is mainly derived from sales of our Ottr software, XynQAPI, MedActionPlan, mTilda (HLA Data Systems), MediGO, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio, as well as our pharmacy sales at TTP. Patient and digital solutions revenue represented 13% of total revenue for the three months ended March 31, 2024 and 11% of our total revenue for the three months ended March 31, 2023.

Current wording

Our patient and digital solutions revenue is primarily derived from sales of our Ottr software, XynQAPI, MedActionPlan, mTilda (HLA Data Systems), MediGO, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio, as well as our pharmacy sales at TTP. Patient and digital solutions revenue represented 12% of total revenue for each of the three and six months ended June 30, 2024, and 13% and 12% of our total revenue for the three and six months ended June 30, 2023.

Previous wording

There were no material changes in the matters for which we make critical accounting estimates in the preparation of our unaudited condensed consolidated financial statements during the three months ended March 31, 2024 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Current wording

There were no material changes in the matters for which we make critical accounting estimates in the preparation of our unaudited condensed consolidated financial statements during the three and six months ended June 30, 2024, respectively, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Previous wording

Product revenue increased by $1.7 million, or 25%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase is primarily due to higher sales of our commercial NGS-based kitted solutions.

Current wording

Product revenue increased by $2.7 million, or 35%, for the three months ended June 30, 2024, compared to the same period in 2023. The increase is primarily due to higher sales of our commercial NGS-based kitted solutions.

Previous wording

Patient and digital solutions revenue increased by $1.0 million, or 12%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase was mainly driven by revenue generated from the acquired businesses of HLA Data Systems and MediGO.

Current wording

Patient and digital solutions revenue increased by $1.7 million, or 19%, for the three months ended June 30, 2024, compared to the same period in 2023. The increase was mainly driven by revenue generated from the acquired businesses of HLA Data Systems and MediGO.

Previous wording

Cost of product increased by $1.3 million, or 31%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase is primarily due to increased sales of our commercial NGS-based kitted solutions, which was partially offset by certain cost reduction efforts.

Current wording

Cost of product increased by $2.3 million, or 59%, for the three months ended June 30, 2024, compared to the same period in 2023. The increase is primarily due to increased sales of our commercial NGS-based kitted solutions.

Previous wording

Cost of patient and digital solutions increased by $0.4 million, or 5%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase is primarily due to an increase in cost of goods from sales in the digital solution business.

Current wording

Cost of patient and digital solutions increased by $0.8 million, or 11%, for the three months ended June 30, 2024, compared to the same period in 2023. The increase is primarily associated with the revenue growth in the patient and digital solution business.

Previous wording

General and administrative expenses decreased by $1.1 million, or (4)%, for the three months ended March 31, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in legal expense of $2.2 million and a decrease in consulting expense of $0.6 million, offset by an increase in personnel-related costs of $0.9 million, and an increase in stock-based compensation expense of $0.6 million.

Current wording

General and administrative expenses decreased by $1.6 million, or (6)%, for the three months ended June 30, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in legal expenses of $5.8 million and a decrease in consulting expenses of $0.2 million, offset by an increase in personnel-related costs of $4.1 million and an increase in stock-based compensation expense of $0.6 million.

Previous wording

Research and development expenses decreased by $5.6 million, or (23)%, for the three months ended March 31, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in clinical trials expense of $3.2 million, a decrease in personnel-related costs of $0.7 million, a decrease in consulting expense of $0.6 million, a decrease in software cost of $0.4 million, a decrease in reagent and consumables expense of $0.4 million, and a decrease in stock-based compensation expense of $0.2 million.

Current wording

Research and development expenses decreased by $6.2 million, or (14)%, for the six months ended June 30, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in clinical trials expenses of $2.9 million, a decrease in personnel-related costs of $1.9 million, a decrease in consulting expenses of $0.8 million and a decrease in software costs of $0.6 million.

Previous wording

Sales and marketing expenses decreased by $3.4 million, or (15)%, for the three months ended March 31, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in personnel-related costs of $2.1 million, a decrease in stock-based compensation expense of $0.7 million, and a decrease in travel expense of $0.5 million.

Current wording

Sales and marketing expenses decreased by $4.0 million, or (9)%, for the six months ended June 30, 2024, compared to the same period in 2023. The decrease is primarily due to a decrease in personnel-related costs of $1.7 million, a decrease in stock-based compensation expense of $0.5 million, a decrease in marketing and tradeshow expenses of $1.0 million and a decrease in sponsorship expenses of $0.8 million.

Previous wording

Interest income, net increased by $0.2 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase is primarily due to interest income earned on U.S. agency securities and corporate debt securities.

Current wording

Interest income, net increased by $0.2 million for the six months ended June 30, 2024, compared to the same period in 2023. The increase is primarily due to interest income earned on U.S. agency securities and corporate debt securities.

Previous wording

Other expense, net decreased by $1.7 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to $1.0 million in investment write-off in the three months ended March 31, 2023 and $0.9 million in unrealized loss on the investment in Miromatrix in the three months ended March 31, 2023, offset by an increase in exchange losses and other expenses of $0.3 million.

Current wording

Other expense, net decreased by $1.9 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to $1.0 million in investment write-off and $0.9 million in unrealized loss on the investment in Miromatrix in the six months ended June 30, 2023.

Previous wording

Income tax benefit (expense) increased by $0.2 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase is primarily attributable to a change in mixed profit (loss) across jurisdictions.

Current wording

Income tax benefit (expense) increased by $0.1 million for the six months ended June 30, 2024, compared to the same period in 2023. The increase is primarily attributable to a change in mixed profit (loss) across jurisdictions.

Previous wording

Cash Flows for the Three Months Ended March 31, 2024 and 2023

Current wording

Cash Flows for the Six Months Ended June 30, 2024 and 2023

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was $15.3 million. Net operating assets decreased by $19.0 million. Our noncash items included $13.3 million in stock-based compensation expense, $3.8 million of depreciation and amortization expense, $1.4 million of amortization of right-of-use assets, $0.3 million of revaluation of contingent consideration to estimated fair value, and $1.5 million of amortization of premium on short-term marketable securities, net.

Current wording

Cash provided by operating activities for the six months ended June 30, 2024 was $3.6 million. Net operating assets decreased by $16.4 million. Our noncash items included $26.5 million in stock-based compensation expense, $7.4 million of depreciation and amortization expense, $2.8 million of amortization of right-of-use assets, $0.5 million of revaluation of contingent consideration to estimated fair value, and $0.8 million of amortization of premium on short-term marketable securities, net.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2023 was $0.7 million. Net operating assets increased $4.4 million. Our noncash items included $13.8 million in stock-based compensation expense, $3.4 million of depreciation and amortization expense, $1.3 million of amortization of right-of-use assets, $0.9 million of unrealized loss on long-term marketable equity securities, $1.0 million of asset impairment and write-downs and $0.8 million of amortization of premium on short-term marketable securities, net.

Current wording

Cash provided by operating activities for the six months ended June 30, 2023 was $0.2 million. Net operating assets increased $12.4 million. Our noncash items included $26.5 million in stock-based compensation expense, $7.1 million of depreciation and amortization expense, $2.7 million of amortization of right-of-use assets, $0.9 million of unrealized loss on long-term marketable equity securities, $1.0 million of asset impairment and write-downs, $0.5 million of revaluation of contingent consideration to estimated fair value and $2.1 million of amortization of premium on short-term marketable securities, net.

Previous wording

For the three months ended March 31, 2024, net cash provided by investing activities of $27.7 million was primarily related to proceeds from maturities of marketable securities of $86.9 million, offset by purchases of marketable securities of $57.7 million, and $1.5 million related to additions of capital expenditures, net.

Current wording

For the six months ended June 30, 2024, net cash provided by investing activities of $16.0 million was primarily related to proceeds from maturities of marketable securities of $112.5 million, offset by purchases of marketable securities of $93.2 million, and $3.3 million related to additions of capital expenditures, net.

Previous wording

For the three months ended March 31, 2023, net cash used in investing activities of $14.8 million was primarily related to the purchases of marketable securities of $86.3 million and $2.8 million related to additions of capital expenditures, net. These payments were offset by maturities of marketable securities of $79.0 million.

Current wording

For the six months ended June 30, 2023, net cash provided by investing activities of $0.6 million was primarily related to maturities of marketable securities of $145.6 million, offset by the purchases of marketable securities of $135.3 million, $5.1 million related to additions of capital expenditures, net and $4.6 million acquisition of business, net of cash acquired.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 of $1.3 million was primarily due to taxes paid related to net share settlements of restricted stock units of $0.7 million, repurchase and retirement of common stock of $0.5 million and payments of contingent consideration of $0.6 million. These payments were offset by proceeds from issuances of common stock under our employee stock purchase plan of $0.5 million.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 of $6.1 million was primarily due to taxes paid related to net share settlements of restricted stock units of $4.3 million, repurchase and retirement of common stock of $0.5 million and payments of contingent consideration of $2.0 million. These payments were offset by proceeds from issuances of common stock under our employee stock purchase plan of $0.5 million.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2023 of $1.1 million was primarily due to taxes paid related to net share settlements of restricted stock units of $0.7 million, repurchase and retirement of common stock of $0.7 million and payments of contingent consideration $0.3 million. These payments were partially offset by proceeds from issuances of common stock under our employee stock purchase plan of $0.5 million.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 of $2.7 million was primarily due to taxes paid related to net share settlements of restricted stock units of $2.2 million, repurchase and retirement of common stock of $0.8 million and payments of contingent consideration $0.3 million. These payments were partially offset by proceeds from issuances of common stock under our employee stock purchase plan of $0.5 million.

Previous wording

We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $695.5 million at March 31, 2024. As of March 31, 2024, we had cash, cash equivalents and marketable securities of $215.9 million and no debt outstanding.

Current wording

We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $696.8 million at June 30, 2024. As of June 30, 2024, we had cash, cash equivalents and marketable securities of $228.9 million and no debt outstanding.

Previous wording

On May 10, 2023, we filed a universal shelf registration statement (File No. 333-271814), or the Registration Statement, and we thereafter filed post-effective amendments thereto and expect to file another post-effective amendment thereto on or about May 9, 2024. Upon its effectiveness, we can sell from time to time up to $250.0 million of shares of our common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for our own account in one or more offerings under the Registration Statement. The terms of any offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Registration Statement filed with the SEC prior to the completion of any such offering.

Current wording

On May 10, 2023, we filed a universal shelf registration statement (File No. 333-271814), or the Registration Statement, and we thereafter filed post-effective amendments on May 9, 2024 and May 23, 2024. The SEC declared the Registration Statement effective on May 23, 2024, and as a result, we can sell from time to time up to $250.0 million of shares of our common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for our own account in one or more offerings under the Registration Statement. The terms of any offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Registration Statement filed with the SEC prior to the completion of any such offering.

Previous wording

The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions. During the three months ended March 31, 2024, we purchased an aggregate of 55,500 shares of our common stock, under the Repurchase Program for an aggregate purchase price of $0.5 million. As of March 31, 2024, $21.4 million remained available for future share repurchases under the Repurchase Program.

Current wording

The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions. During the six months ended June 30, 2024, we purchased an aggregate of 55,500 shares of our common stock, under the Repurchase Program for an aggregate purchase price of $0.5 million. There were no repurchases during the three months ended June 30, 2024. As of June 30, 2024, $21.4 million remained available for future share repurchases under the Repurchase Program.

Previous wording

AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a LCD first issued by MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian. The Medicare reimbursement rate for AlloSure Kidney is currently $2,841. AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart. In November 2020, Noridian issued a parallel coverage policy granting coverage for AlloSure Heart when used in conjunction with AlloMap Heart, which became effective in December 2020. In 2021, Palmetto and Noridian issued coverage policies written by MolDX to replace the former product-specific policies. The foundational LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian).The Medicare reimbursement rate for AlloSure Heart is currently $2,753. Effective May 9, 2023, AlloSure Lung is covered for Medicare beneficiaries through the same MolDX LCD (Noridian L38629). The Medicare reimbursement rate for AlloSure Lung is$2,753. Effective April 1, 2023, HeartCare, a multimodality testing service that includes both AlloMap Heart and AlloSure Heart provided in a single patient encounter for heart transplant surveillance, is covered, subject to certain limitations, for Medicare beneficiaries through the same MolDX LCD(Noridian L38629). The Medicare reimbursement rate for HeartCare is $5,993.

Current wording

AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a LCD first issued by MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian. The Medicare reimbursement rate for AlloSure Kidney is currently $2,841. AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart. In November 2020, Noridian issued a parallel coverage policy granting coverage for AlloSure Heart when used in conjunction with AlloMap Heart, which became effective in December 2020. In 2021, Palmetto and Noridian issued coverage policies written by MolDX to replace the former product-specific policies. The foundational LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian). The Medicare reimbursement rate for AlloSure Heart is currently $2,753. Effective May 9, 2023, AlloSure Lung is covered for Medicare beneficiaries through the same MolDX LCD (Noridian L38629). The Medicare reimbursement rate for AlloSure Lung is $2,753. Effective April 1, 2023, HeartCare, a multimodality testing service that includes both AlloMap Heart and AlloSure Heart provided in a single patient encounter for heart transplant surveillance, is covered, subject to certain limitations, for Medicare beneficiaries through the same MolDX LCD (Noridian L38629). The Medicare reimbursement rate for HeartCare is $5,993.