10-Q 1 cdna-20220930.htm 10-Q cdna-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
__________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to              
Commission file number: 001-36536
__________________________________________________
CAREDX, INC.
(Exact name of registrant as specified in its charter)
__________________________________________________
Delaware94-3316839
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
8000 Marina Boulevard
Brisbane, California 94005
(Address of principal executive offices and zip code)
(415) 287-2300
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
__________________________________________________
Securities registered pursuant to Section 12(b) of the Act
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.001 per shareCDNAThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
There were 53,537,287 shares of the registrant’s Common Stock issued and outstanding as of November 1, 2022.



CareDx, Inc.
TABLE OF CONTENTS
Page No.
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021
September 30, 2022 and 2021
September 30, 2022 and 2021

2

PART I. FINANCIAL INFORMATION
ITEM 1.    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CareDx, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$82,959 $348,485 
Marketable securities208,317  
Accounts receivable70,425 59,761 
Inventory18,086 17,186 
Prepaid and other current assets8,370 7,928 
Total current assets388,157 433,360 
Property and equipment, net34,049 22,044 
Operating leases right-of-use assets35,843 17,993 
Intangible assets, net43,855 50,195 
Goodwill37,523 36,983 
Restricted cash198 211 
Other assets4,886 5,835 
Total assets$544,511 $566,621 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$10,625 $13,337 
Accrued compensation14,312 26,042 
Accrued and other liabilities45,351 37,922 
Total current liabilities70,288 77,301 
Deferred tax liability13 415 
Common stock warrant liability50 139 
Deferred payments for intangible assets2,522 5,041 
Operating lease liability, less current portion34,708 17,394 
Other liabilities251 455 
Total liabilities107,832 100,745 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding at September 30, 2022 and December 31, 2021
  
Common stock: $0.001 par value; 100,000,000 shares authorized at September 30, 2022 and December 31, 2021; 53,523,453 shares and 52,923,360 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
52 52 
Additional paid-in capital886,909 853,683 
Accumulated other comprehensive loss(8,809)(4,670)
Accumulated deficit(441,473)(383,189)
Total stockholders’ equity436,679 465,876 
Total liabilities and stockholders’ equity$544,511 $566,621 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

CareDx, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue:
Testing services revenue$64,751 $66,464 $198,330 $190,635 
Product revenue7,194 6,521 20,696 19,160 
Patient and digital solutions revenue7,414 2,604 20,383 7,382 
Total revenue79,359 75,589 239,409 217,177 
Operating expenses:
Cost of testing services17,771 18,038 53,629 51,756 
Cost of product4,736 4,919 13,022 13,771 
Cost of patient and digital solutions5,794 1,879 16,071 4,861 
Research and development22,306 19,439 66,818 54,479 
Sales and marketing22,261 21,370 72,359 56,421 
General and administrative23,830 18,671 75,621 50,216 
Total operating expenses96,698 84,316 297,520 231,504 
Loss from operations(17,339)(8,727)(58,111)(14,327)
Other income (expense):
Interest income, net1,225 20 1,892 147 
Change in estimated fair value of common stock warrant liability14 88 89 50 
Other expense, net(572)(3,440)(1,948)(906)
Total other income (expense)667 (3,332)33 (709)
Loss before income taxes(16,672)(12,059)(58,078)(15,036)
Income tax (expense) benefit (267)162 (206)525 
Net loss$(16,939)$(11,897)$(58,284)$(14,511)
Net loss per share (Note 3):
Basic$(0.32)$(0.23)$(1.09)$(0.28)
Diluted$(0.32)$(0.23)$(1.09)$(0.28)
Weighted-average shares used to compute net loss per share:
Basic53,489,418 52,681,451 53,253,210 52,034,450 
Diluted53,489,418 52,681,451 53,253,210 52,034,450 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

CareDx, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net loss$(16,939)$(11,897)$(58,284)$(14,511)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax(1,627)(937)(4,139)(1,997)
Net comprehensive loss$(18,566)$(12,834)$(62,423)$(16,508)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202152,923,360 $52 $853,683 $(4,670)$(383,189)$465,876 
Issuance of common stock under employee stock purchase plan25,852 — 999 — — 999 
RSU settlements, net of shares withheld64,819 — (1,482)— — (1,482)
Issuance of common stock for services1,249 — 58 — — 58 
Issuance of common stock for cash upon exercise of stock options69,993 — 1,598 — — 1,598 
Employee stock-based compensation expense— — 10,563 — — 10,563 
Foreign currency translation adjustment— — — (420)— (420)
Net loss— — — — (19,648)(19,648)
Balance at March 31, 202253,085,273 52 865,419 (5,090)(402,837)457,544 
RSU settlements, net of shares withheld216,950 — (3,211)— — (3,211)
Issuance of common stock for services2,156 — 79 — — 79 
Issuance of common stock for cash upon exercise of stock options
19,333 — 413 — — 413 
Employee stock-based compensation expense— — 12,513 — — 12,513 
Foreign currency translation adjustment— — — (2,092)— (2,092)
Net loss— — — — (21,697)(21,697)
Balance at June 30, 202253,323,712 52 875,213 (7,182)(424,534)443,549 
Issuance of common stock under employee stock purchase plan67,570 — 1,231 — — 1,231 
RSU settlements, net of shares withheld119,429 — (850)— — (850)
Issuance of common stock for services3,545 — 79 — — 79 
Issuance of common stock for cash upon exercise of stock options9,197 — 139 — — 139 
Employee stock-based compensation expense— — 11,097 — — 11,097 
Foreign currency translation adjustment— — — (1,627)— (1,627)
Net loss— — — — (16,939)(16,939)
Balance at September 30, 202253,523,453 $52 $886,909 $(8,809)$(441,473)$436,679 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202049,441,166 $49 $632,253 $(2,096)$(352,527)$277,679 
Issuance of common shares through public equity offering, net of commissions and offering costs of $12,495
2,211,538 2 188,753 — — 188,755 
Issuance of common stock under employee stock purchase plan24,052 — 838 — — 838 
RSU settlements, net of shares withheld121,447 — (2,313)— — (2,313)
Issuance of common stock for services1,339 — 96 — — 96 
Issuance of common stock for cash upon exercise of stock options139,579 — 2,193 — — 2,193 
Employee stock-based compensation expense— — 6,488 — — 6,488 
Foreign currency translation adjustment— — — (1,503)— (1,503)
Net loss— — — — (687)(687)
Balance at March 31, 202151,939,121 51 828,308 (3,599)(353,214)471,546 
RSU settlements, net of shares withheld160,286 — (6,638)— — (6,638)
Issuance of common stock for services23,163 — 59 — — 59 
Issuance of common stock for cash upon exercise of stock options427,059 — 6,833 — — 6,833 
Issuance of common stock upon cash exercise of warrants3,132 — 205 — — 205 
Employee stock-based compensation expense— — 9,322 — — 9,322 
Foreign currency translation adjustment— — — 443 — 443 
Net loss— — — — (1,927)(1,927)
Balance at June 30, 202152,552,761 51 838,089 (3,156)(355,141)479,843 
Issuance of common stock under employee stock purchase plan21,412 — 1,301 — — 1,301 
RSU settlements, net of shares withheld118,466 — (8,707)— — (8,707)
Issuance of common stock for services4,008 — 75 — — 75 
Issuance of common stock for cash upon exercise of stock options80,086 1 1,894 — — 1,895 
Employee stock-based compensation expense— — 10,574 — — 10,574 
Foreign currency translation adjustment— — — (937)— (937)
Net loss— — — — (11,897)(11,897)
Balance at September 30, 202152,776,733 $52 $843,226 $(4,093)$(367,038)$472,147 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended September 30,
20222021
Operating activities:
Net loss$(58,284)$(14,511)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation34,427 26,583 
Revaluation of common stock warrant liability to estimated fair value(89)(50)
Depreciation and amortization8,389 6,301 
Amortization of right-of-use assets3,120 2,187 
Unrealized loss on long-term marketable equity securities215 167 
Asset impairment and write-downs840  
Revaluation of contingent consideration to estimated fair value830 (35)
Amortization of premium on short-term marketable securities, net993 930 
Changes in operating assets and liabilities:
Accounts receivable(10,838)(21,580)
Inventory(2,258)(9,417)
Prepaid and other assets(397)(2,072)
Operating leases liabilities, net(2,390)(1,677)
Accounts payable(1,697)400 
Accrued compensation(11,610)2,711 
Accrued and other liabilities6,482 7,688 
Refund liability - CMS advance payment (20,496)
Change in deferred taxes(157)(589)
Net cash used in operating activities(32,424)(23,460)
Investing activities:
Acquisition of business, net of cash acquired(610)(3,500)
Acquisition of intangible assets(3,100)(6,700)
Purchases of short-term marketable securities(283,442)(5,500)
Maturities of short-term marketable securities74,132 78,905 
Additions of capital expenditures, net(17,957)(7,711)
Net cash (used in) provided by investing activities(230,977)55,494 
Financing activities:
Proceeds from issuance of common shares in public equity offering, net of issuance costs paid 188,855 
Proceeds from issuance of common stock under employee stock purchase plan2,231 2,139 
Taxes paid related to net share settlement of restricted stock units(5,543)(15,376)
Proceeds from exercise of warrants 4 
Proceeds from exercise of stock options2,149 10,920 
Principal payments on finance lease obligations (66)
Payment of contingent consideration(1,000) 
Net cash (used in) provided by financing activities(2,163)186,476 
Effect of exchange rate changes on cash, cash equivalents and restricted cash25 (157)
Net (decrease) increase in cash, cash equivalents and restricted cash(265,539)218,353 
Cash, cash equivalents, and restricted cash at beginning of period348,696 134,939 
Cash, cash equivalents, and restricted cash at end of period$83,157 $353,292 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
CareDx, Inc. (“CareDx” or the “Company”), together with its subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers. The Company’s headquarters are in Brisbane, California. The primary operations are in Brisbane, California; Omaha, Nebraska; Fremantle, Australia; and Stockholm, Sweden.
The Company’s commercially available testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA (“dd-cfDNA”) solution for kidney transplant patients, AlloMap® Heart, a gene expression solution for heart transplant patients, AlloSure® Heart, a dd-cfDNA solution for heart transplant patients, and AlloSure® Lung, a dd-cfDNA solution for lung transplant patients. The Company has initiated several clinical studies to generate data on its existing and planned future testing services. In April 2020, the Company announced its first biopharma research partnership for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy transplants. The Company also offers high-quality products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. In 2019, the Company began providing digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management (“Ottr”) and XynManagement, Inc. (“XynManagement”), as well as the acquisitions of TransChart LLC (“TransChart”), MedActionPlan.com, LLC (“MedActionPlan”) and The Transplant Pharmacy, LLC (“TTP”) in 2021.
Testing Services
AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017. The Medicare reimbursement rate for AlloSure Kidney is currently $2,841. AlloSure Kidney has received positive coverage decisions from several commercial payers, and is reimbursed by other private payers on a case-by-case basis.
AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S. private payers.
In October 2020, AlloSure Heart received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart. In November 2020, Noridian Healthcare Solutions, the Company's Medicare Administrative Contractor, issued a parallel coverage policy granting coverage when used in conjunction with AlloMap Heart, which became effective in December 2020. The Medicare reimbursement rate for AlloSure Heart is currently $2,753.
In May 2021, the Company purchased a minority investment of common stock in the biotechnology company Miromatrix Medical, Inc. (“Miromatrix”), for $5.0 million, and the investment is marked to market. Miromatrix works to eliminate the need for an organ transplant waiting list through the development of implantable engineered biological organs.

Clinical Studies
In January 2018, the Company initiated the Kidney Allograft Outcomes AlloSure Kidney Registry study (“K-OAR”), to develop additional data on the clinical utility of AlloSure Kidney for surveillance of kidney transplant recipients. K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled more than 1,700 renal transplant patients who will receive AlloSure Kidney long-term surveillance.
In September 2018, the Company initiated the Surveillance HeartCare™ Outcomes Registry (“SHORE”). SHORE is a prospective, multi-center, observational registry of patients receiving HeartCare for surveillance. HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure® Heart in one surveillance solution.

In February 2019, AlloSure® Lung became available for lung transplant patients through a compassionate use program while the test is undergoing further studies. In June 2020, the Company submitted an AlloSure Lung application to the Palmetto MolDx Technical Assessment program seeking coverage and reimbursement for Medicare beneficiaries.

In September 2019, the Company announced the commencement of the Outcomes of KidneyCare on Renal Allografts (“OKRA”) study, which is an extension of K-OAR. OKRA is a prospective, multi-center, observational, registry of patients receiving KidneyCare for surveillance. KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of iBox for a multimodality surveillance solution. The Company has not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or KidneyCare.
9

Products
The Company’s suite of AlloSeq products are commercial next generation sequencing (“NGS”)-based kitted solutions. These products include: AlloSeq™ Tx, a high-resolution Human Leukocyte Antigen (“HLA”) typing solution, AlloSeq™ cfDNA, a surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq™ HCT, a solution for chimerism testing for stem cell transplant recipients.
The Company's other HLA typing products include: TruSight HLA, a NGS-based high resolution typing solution; Olerup SSP®, based on the sequence specific primer (“SSP”) technology; and QTYPE®, which uses real-time polymerase chain reaction (“PCR”) methodology, to perform HLA typing.
In March 2021, the Company acquired certain assets of BFS Molecular S.R.L. (“BFS Molecular”), a software company focused on NGS-based patient testing solutions. BFS Molecular brings extensive software and algorithm development capabilities for NGS transplant surveillance products.
Patient and Digital Solutions
Following the acquisitions of both Ottr and XynManagement, the Company is a leading provider of transplant patient management software (“Ottr software”), as well as of transplant quality tracking and waitlist management solutions. Ottr software provides comprehensive solutions for transplant patient management and enables integration with electronic medical record (“EMR”) systems providing patient surveillance management tools and outcomes data to transplant centers. XynManagement provides two unique solutions, XynQAPI software (“XynQAPI”) and XynCare. XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients ("SRTR") reporting. XynCare includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility.
In September 2020, the Company launched AlloCare, a mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with Patient Care Managers for AlloSure scheduling and measure health metrics.
In January 2021, the Company acquired TransChart. TransChart provides EMR software to hospitals throughout the U.S. to care for patients who have or may need an organ transplant. As part of the Company's acquisition of TransChart in January 2021, the Company acquired TxAccess, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs, closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation.
In June 2021, the Company acquired the Transplant Hero patient application. The application helps patients manage their medications through alarms and interactive logging of medication events.
In June 2021, the Company entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, the Company and OrganX will develop advanced analytics that integrate AlloSure, the first transplant specific dd-cfDNA assay, with large transplant databases to provide clinical data solutions. This partnership delivers the next level of innovation beyond multi-modality by incorporating a variety of clinical inputs to create a universal composite scoring system. The Company has agreed to potential future milestone payments.
In November 2021, the Company acquired MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education. MedActionPlan is a leader in patient medication management for transplant patients and beyond.
In December 2021, the Company acquired TTP, a transplant focused pharmacy located in Mississippi. TTP provides individualized transplant pharmacy services for patients at multiple transplant centers located throughout the U.S.
COVID-19 Pandemic
The full impact of the continued COVID-19 pandemic, including the impact associated with preventative and precautionary measures that the Company, other businesses and governments have taken and may take, continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company, but the pandemic may materially affect the Company's financial condition, liquidity and future results of operations.
In the final weeks of March and during April 2020, with hospitals increasingly caring for COVID-19 patients, hospital administrators chose to limit or even defer, non-emergency procedures. Immunosuppressed transplant patients either self-prescribed or were asked to avoid transplant centers and caregiver visits to reduce the risk of contracting COVID-19. As a result, with transplant surveillance visits down, the Company experienced a slowdown in testing services volumes in the final weeks of March and during April 2020. As a response to the COVID-19 pandemic, and to enable immune-compromised transplant patients to continue to have their blood drawn, in late March 2020, the Company launched RemoTraC, a remote
10

home-based blood draw solution using mobile phlebotomy for AlloSure and AlloMap surveillance tests, as well as for other standard monitoring tests.
There continues to be uncertainty around the COVID-19 pandemic as the Omicron variant, including its sub-variants, has caused an increase in COVID-19 cases globally, impacted the availability of medical personnel in transplant centers and the volume of transplant procedures. A sustained reduction in transplant volume can negatively impact the testing volumes, as the Company saw in the early part of the first quarter of 2022.
The Company's product business experienced a reduction in forecasted sales volume throughout the second and third quarters of 2020, as it was unable to undertake onsite discussions and demonstrations of its recently launched NGS products, including AlloSeq Tx 17, which was awarded CE mark authorization in May 2020. The Company's product business regained normalized sales volumes during the fourth quarter of 2020.
The Company is maintaining its testing, manufacturing, and distribution facilities while implementing specific protocols to reduce contact among employees. In areas where COVID-19 impacts healthcare operations, the Company's field-based sales and clinical support teams are supporting providers through virtual platforms. Although the executive orders that placed certain restrictions on operations in San Mateo County and the State of California, where the Company's laboratory and headquarters are located, were lifted effective June 15, 2021, new orders or restrictions could be adopted in the future depending upon the COVID-19 transmission rates in the Company's county and state, as well as other factors.
In addition, the Company created, and continues to have, a COVID-19 task force that is responsible for crisis decision making, employee communications, and enforcing all safety, monitoring and testing protocols in line with local regulations.
Liquidity and Capital Resources
The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $441.5 million at September 30, 2022. As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of $291.3 million and no debt outstanding.
CMS Accelerated and Advance Payment Program for Medicare Providers
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Pursuant to the CARES Act, the Centers for Medicare & Medicaid Services (CMS”) expanded its Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic. CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submitted a request to the appropriate Medicare Administrative Contractor and met the required qualifications. During April 2020, the Company received an advance payment from CMS of approximately $20.5 million, and recorded the payment as Deferred revenue - CMS advance payment on the Company's condensed consolidated balance sheet. During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and repaid the entire amount in January 2021.
January 2021 Underwritten Public Offering of Common Stock
On January 25, 2021, the Company sold 1,923,077 shares of its common stock through an underwritten public offering at a public offering price of $91.00 per share. The net proceeds to the Company from the offering were approximately $164.0 million, after deducting underwriting discounts and commissions and offering expenses.
On February 11, 2021, the Company sold 288,461 shares of its common stock pursuant to the full exercise of the overallotment option granted to the underwriters in connection with the offering. The net proceeds to the Company from the full exercise of the underwriters' overallotment option were approximately $24.7 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC) on February 24, 2022. Material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are reflected below.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and follow the requirements of the SEC for
11

interim reporting. As permitted under those rules, certain notes and other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of the Company’s financial information. The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited consolidated financial statements as of that date but does not include all of the financial information required by U.S. GAAP for complete financial statements. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to transaction price estimates used for testing services revenue; standalone fair value of patient and digital solutions revenue performance obligations; accrued expenses for clinical studies; inventory valuation; the fair value of assets and liabilities acquired in a business combination or an assets acquisition (including identifiable intangible assets acquired); the fair value of contingent consideration recorded in connection with a business combination or an asset acquisition; the grant date fair value assumptions used to estimate stock-based compensation expense; income taxes; impairment of long-lived assets and indefinite-lived assets (including goodwill); and legal contingencies. Actual results could differ from those estimates.
Concentrations of Credit Risk and Other Risks and Uncertainties
For the three months ended September 30, 2022 and 2021, approximately 53% and 61%, respectively, of total revenue was derived from Medicare. For the nine months ended September 30, 2022 and 2021, approximately 54% and 60%, respectively, of total revenue was derived from Medicare.
As of September 30, 2022 and December 31, 2021, approximately 30% and 27%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable at either September 30, 2022 or December 31, 2021.
Marketable Securities
The Company considers all highly liquid investments in securities with a maturity of greater than three months at the time of purchase to be marketable securities. As of September 30, 2022, the Company’s short-term marketable securities consisted of corporate debt securities with maturities of greater than three months but less than twelve months at the time of purchase, which were classified as current assets on the condensed consolidated balance sheet.
The Company classifies its short-term marketable securities as held-to-maturity at the time of purchase and reevaluates such designation at each balance sheet date. The Company has the positive intent and ability to hold these marketable securities to maturity. Short-term marketable securities are carried at amortized cost and are adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income, net on the condensed consolidated statements of operations. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on short-term marketable securities are included in interest income, net. The cost of securities sold will be determined using specific identification.
The Company considers investments in securities with remaining maturities of over one year as long-term investments. As of September 30, 2022, the Company's long-term marketable securities consisted of corporate equity securities. The long-term marketable securities are classified as other assets on the condensed consolidated balance sheet.
The Company classifies its long-term marketable debt securities as available-for-sale and reevaluates such designation at each balance sheet date. Unrealized gains and losses from the reevaluation of the long-term marketable debt securities, if any, are included in other comprehensive gain (loss) in the condensed consolidated statement of comprehensive income (loss). Realized gains and losses and declines in value judged to be other-than-temporary, if any, on long-term marketable securities are included in interest income, net.
The Company records its long-term marketable equity securities at fair market value. Unrealized gains and losses from the remeasurement of the long-term marketable equity securities to fair value are included in other income (expense), net, in the condensed consolidated statements of operations.
Leases
The Company adopted Accounting Standard Codification (“ASC”) Topic 842, Leases, and determines if an arrangement is or contains a lease at contract inception. A right-of-use (“ROU”) asset, representing the underlying asset during the lease term, and
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a lease liability, representing the payment obligation arising from the lease, are recognized on the condensed consolidated balance sheet at lease commencement based on the present value of the payment obligation. For operating leases, expense is recognized on a straight-line basis over the lease term. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet.
The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.
As of September 30, 2022, the Company’s leases had remaining terms of 1.17 years to 10.35 years, some of which include options to extend the lease term.
Recent Accounting Pronouncements
In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which contains amendments that require annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model. The disclosures include (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The amendments set forth in this ASU are effective for all entities for annual periods beginning after December 15, 2021. Early application of the amendments in this ASU is permitted. The amendments in this ASU should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. The Company adopted the standard prospectively on January 1, 2022. The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. The amendments set forth in this ASU are effective for fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The amendments in this ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company early adopted the standard prospectively on January 1, 2022. The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which contains amendments that clarify and reduce diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The amendments set forth in this ASU are effective for all entities for annual periods beginning after December 15, 2021. Early application of the amendments in this ASU is permitted for all entities. The amendments in this ASU should be applied prospectively. The Company prospectively adopted the standard on January 1, 2022. The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which contains amendments that improve the consistency of the ASC by including all disclosure guidance in the appropriate Disclosure Section (Section 50). The FASB provided transition guidance for all the amendments in this ASU. The amendments in Sections B and C (Section A has been removed) of this ASU are effective for annual periods beginning after December 15, 2020 for public business entities. Early application of the amendments in this ASU is permitted for public business entities for any annual or interim period for which financial statements have not been issued. The amendments in this ASU should be applied retrospectively. The Company adopted the standard on January 1, 2021. The adoption of the new standard did not have an impact on the Company's consolidated financial statements and disclosures.
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3. NET LOSS PER SHARE
Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common share equivalents as their effect would have been antidilutive.
The following tables set forth the computation of the Company’s basic and diluted net loss per share (in thousands, except shares and per share data):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Numerator:
Net loss used to compute basic and diluted net loss per share$(16,939)$(11,897)$(58,284)$(14,511)
Denominator:
Weighted-average shares used to compute basic and diluted net loss per share
53,489,418 52,681,451 53,253,210 52,034,450 
Net loss per share:
Basic and diluted$(0.32)$(0.23)$(1.09)$(0.28)
The following potentially dilutive securities have been excluded from diluted net loss per share as of September 30, 2022 and 2021 because their effect would be antidilutive:
Three and Nine Months Ended September 30,
20222021
Shares of common stock subject to outstanding options3,116,421 1,989,286 
Shares of common stock subject to outstanding common stock warrants3,132 3,132 
Restricted stock units3,077,633 1,810,257 
Total common stock equivalents6,197,186 3,802,675 
4. FAIR VALUE MEASUREMENTS
The Company records its financial assets and liabilities at fair value. The carrying amounts of certain financial instruments of the Company, including cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.  The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1: Inputs that include quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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The following tables set forth the Company’s financial assets and liabilities, measured at fair value on a recurring basis, as of September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022
Fair Value Measured Using 
(Level 1)(Level 2)(Level 3)Total Balance
Assets    
Cash equivalents:
Money market funds$64,618 $ $ $64,618 
Long-term marketable securities:
Corporate equity securities3,042   3,042 
Total$67,660 $ $ $67,660 
Liabilities
Short-term liabilities:
Contingent consideration$ $ $2,650 $2,650 
Long-term liabilities:
Contingent consideration  2,522 2,522 
Common stock warrant liability  50 50 
Total$ $ $5,222 $5,222 

December 31, 2021
 Fair Value Measured Using 
 (Level 1)(Level 2)(Level 3)Total Balance
Assets    
Cash equivalents:
Money market funds$335,107 $ $ $335,107 
Long-term marketable securities:
Corporate equity securities3,257   3,257 
Corporate debt securities 500  500 
Total$338,364 $500 $ $338,864 
Liabilities
Short-term liabilities:
Contingent consideration$ $ $2,114 $2,114 
Long-term liabilities:
Contingent consideration  3,227 3,227 
Common stock warrant liability  139 139 
Total $ $ $5,480 $5,480 
The following table presents the issuances, exercises, changes in fair value and reclassifications of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):
 (Level 3)
Common Stock Warrant Liability and Contingent Consideration
Balance as of December 31, 2021
$5,480 
Change in estimated fair value of common stock warrant liability(89)
Change in estimated fair value of contingent consideration831 
Payments related to contingent consideration(1,000)
Balance as of September 30, 2022
$5,222 
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As of September 30, 2022, the Company had one investment in convertible preferred shares carried at cost. In the event the Company had to calculate the fair value of this investment, it would be based on Level 3 inputs. This investment is not considered material to the Company's condensed consolidated financial statements.
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework.  The valuation methodologies used for the Company’s instruments measured at fair value and their classification in the valuation hierarchy are summarized below:
Money market funds – Investments in money market funds are classified within Level 1. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. At September 30, 2022 and December 31, 2021, money market funds were included as cash and cash equivalents in the condensed consolidated balance sheets.
Short-term marketable securities – Investments in short-term marketable securities are classified within Level 2. The securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
Long-term marketable equity and debt securities – Investments in long-term marketable equity securities are classified within Level 1. The securities are recorded at fair value based on readily available quoted market prices in active markets. Investments in long-term marketable debt securities are classified within Level 2. The securities are recorded at fair value based on observable inputs for quoted prices for identical or similar assets in markets that are not active. Long-term marketable securities are located within other assets on the condensed consolidated balance sheets.
Contingent consideration Contingent consideration is classified within Level 3. Contingent consideration relates to asset acquisitions and business combinations. The Company recorded the estimate of the fair value of the contingent consideration based on its evaluation of the probability of the achievement of the contractual conditions that would result in the payment of the contingent consideration. Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met multiplied by management’s estimate of the probability of success at a discounted rate of 12% at September 30, 2022 and December 31, 2021. The significant input in the Level 3 measurement that is not supported by market activity is the Company’s probability assessment of the achievement of the milestones. The value of the liability is subsequently remeasured to fair value at each reporting date, and the change in estimated fair value is recorded as a component of operating expenses until the milestones are paid, expire or are no longer achievable. Increases or decreases in the estimation of the probability percentage result in a directionally similar impact to the fair value measurement of the contingent consideration liability. The carrying amount of the contingent consideration liability represents its fair value.
Common stock warrant liability – Common stock warrant liability is classified within Level 3. The Company utilizes intrinsic value to estimate the fair value of the warrants. The intrinsic value is computed as the difference between the fair value of the Company’s common stock on the valuation date and the exercise price of the warrants. Increases (decreases) in the Company's stock price discussed above result in a directionally similar impact to the fair value of the common stock warrant liability. Prior to fiscal year 2022, the Company utilized a binomial lattice pricing model (the “Monte Carlo Simulation Model”) which involves a market condition simulation to estimate the fair value of the warrants. The application of the Monte Carlo Simulation Model requires the use of a number of complex assumptions, including the Company’s stock price, expected life of the warrants, stock price volatility determined from the Company’s historical stock prices, and risk-free rates based on the implied yield currently available in the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the warrants. The change in valuation method does not have material financial impact.
Common Stock Warrant Liability Valuation Assumptions Utilized at September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Private Placement Common Stock Warrant Liability
Stock price$17.02$45.48
Exercise price$1.12$1.12
Remaining term (in years)0.541.28
VolatilityN/A66.00 %
Risk-free interest rateN/A0.49 %
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5. CASH AND MARKETABLE SECURITIES
Cash, Cash Equivalents and Restricted Cash
A reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the amount reported within the condensed consolidated statements of cash flows is shown in the table below (in thousands):
September 30, 2022September 30, 2021
Cash and cash equivalents$82,959 $353,082 
Restricted cash198 210 
Total cash, cash equivalents, and restricted cash at the end of the period$83,157 $353,292 
Marketable Securities
All short-term marketable securities were considered held-to-maturity at September 30, 2022. At September 30, 2022, some of the Company’s short-term marketable securities were in an unrealized loss position. The Company determined that it had the positive intent and ability to hold until maturity all short-term marketable securities that have been in a continuous loss position, thus there was no recognition of any other-than-temporary impairment as of September 30, 2022. All short-term marketable securities with unrealized losses as of the balance sheet date have been in a loss position for less than twelve months. Contractual maturities of the short-term marketable securities were within one year or less at September 30, 2022.
The long-term marketable equity securities were recorded in the consolidated balance sheets at fair market value with changes in the fair value recognized in earnings at September 30, 2022 and December 31, 2021. The long-term marketable debt securities were considered available-for-sale at December 31, 2021. The contractual maturity of the long-term marketable debt securities was less than three years. As of September 30, 2022, the Company wrote-off $0.5 million of long-term marketable debt securities.
The amortized cost, gross unrealized holding losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
September 30, 2022
Amortized CostUnrealized Holding LossesFair Value
Short-term marketable securities:
Corporate debt securities$208,317 $(818)$207,499 
Total short-term marketable securities208,317 (818)207,499 
Long-term marketable securities:
Corporate equity securities5,000 (1,958)3,042 
Total long-term marketable securities5,000 (1,958)3,042 
Total$213,317 $(2,776)$210,541