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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
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 March 31, 2024
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, 4th Floor
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 52,083,792 shares of the registrant’s Common Stock issued and outstanding as of May 7, 2024.


CareDx, Inc.
TABLE OF CONTENTS
Page No.
Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023
March 31, 2024 and 2023
March 31, 2024 and 2023

2

PART I. FINANCIAL INFORMATION
ITEM 1.    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CareDx, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
March 31, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$93,299 $82,197 
Marketable securities122,622 153,221 
Accounts receivable60,149 51,061 
Inventory20,130 19,471 
Prepaid and other current assets6,895 7,763 
Total current assets303,095 313,713 
Property and equipment, net34,411 35,246 
Operating leases right-of-use assets28,591 29,891 
Intangible assets, net43,330 45,701 
Goodwill40,336 40,336 
Restricted cash583 586 
Other assets2,060 1,353 
Total assets$452,406 $466,826 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$9,976 $12,872 
Accrued compensation14,565 19,703 
Accrued and other liabilities45,670 45,497 
Total current liabilities70,211 78,072 
Deferred tax liability43 136 
Deferred payments for intangible assets1,348 2,461 
Operating lease liability, less current portion26,893 28,278 
Other liabilities97,686 96,551 
Total liabilities196,181 205,498 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000,000 shares authorized at March 31, 2024 and December 31, 2023; no shares issued and outstanding at March 31, 2024 and December 31, 2023
  
Common stock: $0.001 par value; 100,000,000 shares authorized at March 31, 2024 and December 31, 2023; 51,782,612 and 51,503,377 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
49 49 
Additional paid-in capital959,734 946,511 
Accumulated other comprehensive loss(8,108)(6,963)
Accumulated deficit(695,450)(678,269)
Total stockholders’ equity256,225 261,328 
Total liabilities and stockholders’ equity$452,406 $466,826 
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 March 31,
20242023
Revenue:
Testing services revenue$53,837 $61,784 
Product revenue8,594 6,861 
Patient and digital solutions revenue9,618 8,617 
Total revenue72,049 77,262 
Operating expenses:
Cost of testing services13,632 15,296 
Cost of product5,344 4,066 
Cost of patient and digital solutions6,958 6,604 
Research and development18,711 24,357 
Sales and marketing19,830 23,231 
General and administrative26,911 28,032 
Total operating expenses91,386 101,586 
Loss from operations(19,337)(24,324)
Other income:
Interest income, net2,885 2,666 
Change in estimated fair value of common stock warrant liability 7 
Other expense, net
(290)(1,974)
Total other income2,595 699 
Loss before income taxes(16,742)(23,625)
Income tax benefit (expense)83 (124)
Net loss$(16,659)$(23,749)
Net loss per share (Note 3):
Basic$(0.32)$(0.44)
Diluted$(0.32)$(0.44)
Weighted-average shares used to compute net loss per share:
Basic51,692,358 53,643,216 
Diluted51,692,358 53,643,216 
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 March 31,
20242023
Net loss$(16,659)$(23,749)
Other comprehensive (loss) gain:
Foreign currency translation adjustment, net of tax
(1,145)64 
Comprehensive loss
$(17,804)$(23,685)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

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, 202351,503,377 $49 $946,511 $(6,963)$(678,269)$261,328 
Issuance of common stock under employee stock purchase plan73,759 — 532 — — 532 
Repurchase and retirement of common stock(55,500)— — — (522)(522)
RSU settlements, net of shares withheld252,662 — (668)— — (668)
Issuance of common stock for services6,813 — 56 — — 56 
Issuance of common stock for cash upon exercise of stock options1,501 — 8 — — 8 
Employee stock-based compensation expense— — 13,295 — — 13,295 
Foreign currency translation adjustment, net of tax
— — — (1,145)— (1,145)
Net loss— — — — (16,659)(16,659)
Balance at March 31, 202451,782,612 $49 $959,734 $(8,108)$(695,450)$256,225 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

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, 202253,533,250 $52 $898,806 $(7,503)$(460,444)$430,911 
Issuance of common stock under employee stock purchase plan47,025 — 456 — — 456 
Repurchase and retirement of common stock
(59,472)— — — (690)(690)
RSU settlements, net of shares withheld123,910 — (785)— — (785)
Issuance of common stock for services7,649 — 93 — — 93 
Issuance of common stock for cash upon exercise of stock options820 — 2 — — 2 
Employee stock-based compensation expense— — 13,719 — — 13,719 
Foreign currency translation adjustment, net of tax
— — — 64 — 64 
Net loss— — — — (23,749)(23,749)
Balance at March 31, 2023
53,653,182 $52 $912,291 $(7,439)$(484,883)$420,021 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

CareDx, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March 31,
20242023
Operating activities:
Net loss$(16,659)$(23,749)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation13,344 13,754 
Revaluation of common stock warrant liability to estimated fair value (7)
Depreciation and amortization3,821 3,427 
Asset impairments and write-downs 1,000 
Amortization of right-of-use assets1,402 1,337 
Unrealized loss on long-term marketable equity securities 905 
Revaluation of contingent consideration to estimated fair value319 364 
Amortization of premium and accretion of discount on short-term marketable securities, net1,451 (773)
Changes in operating assets and liabilities:
Accounts receivable(9,199)7,664 
Inventory(1,274)1,217 
Prepaid and other assets108 1,515 
Operating leases liabilities, net(1,372)(1,333)
Accounts payable(2,897)2,590 
Accrued compensation(4,820)(4,888)
Accrued and other liabilities557 (2,352)
Change in deferred taxes(93) 
Net cash (used in) provided by operating activities
(15,312)671 
Investing activities:
Acquisitions of business, net of cash acquired
 (4,562)
Purchases of short-term marketable securities(57,746)(86,310)
Maturities of short-term marketable securities86,893 78,972 
Purchase of corporate equity securities (100)
Additions of capital expenditures(1,487)(2,771)
Net cash provided by (used in) investing activities
27,660 (14,771)
Financing activities:
Proceeds from issuance of common stock under employee stock purchase plan532 456 
Taxes paid related to net share settlement of restricted stock units(668)(656)
Proceeds from exercise of stock options8 2 
Payment of contingent consideration(625)(250)
Repurchase and retirement of common stock(522)(690)
Net cash used in financing activities(1,275)(1,138)
Effect of exchange rate changes on cash and cash equivalents26 (25)
Net increase (decrease) in cash, cash equivalents and restricted cash
11,099 (15,263)
Cash, cash equivalents and restricted cash at beginning of period
82,783 90,443 
Cash, cash equivalents and restricted cash at end of period
$93,882 $75,180 

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. The Company also provides 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, HLA Data Systems, LLC (“HLA Data Systems”) in January 2023 and MediGO, Inc. (“MediGO”) in July 2023.
Testing Services
AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination (“LCD”), first issued by Palmetto MolDX (“MolDX”), which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, the Company’s Medicare Administrative Contractor (“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, the Company 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.
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 also received positive coverage decisions for reimbursement from many of the largest U.S. private payers.
In May 2021 and March 2023, the Company purchased a minority investment of common stock in the biotechnology company Miromatrix Medical, Inc. (“Miromatrix”) for an aggregate amount of $5.1 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. In December 2023, Miromatrix was acquired by United Therapeutics Corporation.
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 1,900 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.
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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.
In December 2021, the Company initiated the ALAMO study. ALAMO is a multicenter observational study and focuses on surveillance in lung transplant recipients within the first post-transplant year. Beyond demonstrating the clinical validity of AlloSure in detecting Acute Lung Allograft Dysfunction, a composite outcome of acute rejection and clinically meaningful infections, the study explores its clinical utility by capturing clinician decision-making processes to further demonstrate the practical clinical application of AlloSure. In addition, the study will collect samples to enable development of AlloMap Lung.
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: 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 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 and 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.
Also in June 2021, the Company entered into a strategic agreement with OrganX, which was amended in April 2022, to develop clinical decision support tools across the transplant patient journey. Together, the Company and OrganX will develop advanced analytics that integrate AlloSure with large transplant databases to provide clinical data solutions. This partnership delivers the next level of innovation 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.
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In January 2023, the Company acquired HLA Data Systems, a Texas-based company that provides software and interoperability solutions for the histocompatibility and immunogenetics community. HLA Data Systems is a leader in the laboratory information management industry for human leukocyte antigen laboratories.
In July 2023, the Company acquired MediGO, an organ transplant supply chain and logistics company. MediGO provides access to donated organs by digitally transforming donation and transplantation workflows to increase organ utilization.
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 $695.5 million at March 31, 2024. As of March 31, 2024, the Company had cash, cash equivalents and marketable securities of $215.9 million and no debt outstanding.
Shelf Registration Statement
On May 10, 2023, the Company filed a universal shelf registration statement (File No. 333-271814) (the “Registration Statement”), and thereafter filed post-effective amendments thereto and expects to file another post-effective amendment thereto on or about May 9, 2024. Upon its effectiveness, the Company can sell from time to time up to $250.0 million of shares of its common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for the Company’s 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 Securities and Exchange Commission (the “SEC”) prior to the completion of any such offering.
Stock Repurchase Program
On December 3, 2022, the Company’s Board of Directors approved a stock repurchase program (the “Repurchase Program”), whereby the Company may purchase up to $50 million of shares of its common stock over a period of up to two years, commencing on December 8, 2022. The Repurchase Program may be carried out at the discretion of a committee of the Company’s 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, the Company purchased an aggregate of 55,500 shares of its 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and estimates used in the 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, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), and follow the requirements of the SEC for 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, 2023 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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
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 asset acquisition (including identifiable intangible assets acquired); the fair value of contingent
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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 March 31, 2024 and 2023, approximately 33% and 42%, respectively, of total revenue was derived from Medicare.
As of March 31, 2024 and December 31, 2023, approximately 37% and 36%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable at either March 31, 2024 or December 31, 2023.
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 March 31, 2024, 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 is determined using specific identification.
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 expense, net, on the condensed consolidated statements of operations.
Leases
The Company 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 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. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less.
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 March 31, 2024, the Company’s leases had remaining terms of 0.17 years to 8.84 years, some of which include options to extend the lease term.
Revenue
The Company recognizes revenue from testing services, product sales and patient and digital solutions revenue in the amount that reflects the consideration that it expects to be entitled in exchange for goods or services as it transfers control to its customers. Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing revenue when, or as, an entity satisfies a performance obligation.
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Testing Services Revenue
AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung patient tests are ordered by healthcare providers. The Company receives a test requisition form with payer information along with a collected patient blood sample. The Company considers the patient to be its customer and the test requisition form to be the contract. Testing services are performed in the Company’s laboratory. Testing services represent one performance obligation in a contract and which is satisfied at the point in time when results of the test are provided to the healthcare provider.
The healthcare providers that order the tests and on whose behalf the Company provides testing services are generally not responsible for the payment of these services. The first and second revenue recognition criteria are satisfied when the Company receives a test requisition form with payer information from the healthcare provider. Generally, the Company bills third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart or AlloSure Lung test result to the healthcare provider. Amounts received may vary amongst payers based on coverage practices and policies of the payer. The Company has used the portfolio approach under ASC Topic 606, Revenue from Contracts with Customers, to identify financial classes of payers. Revenue recognized for Medicare and other contracted payers is based on the agreed current reimbursement rate per test, adjusted for historical collection trends where applicable. The Company estimates revenue for non-contracted payers and self-payers using transaction prices determined for each financial class of payers using history of reimbursements. This includes analysis of an average reimbursement per test and a percentage of tests reimbursed. These estimates require significant judgment.
The Company monitors revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Changes in transaction price estimates are updated quarterly based on actual cash collected or changes made to contracted rates.
In March and May 2023, MolDX issued a new billing article related to the LCD entitled Molecular Testing for Solid Organ Allograft Rejection. The billing article issued in May 2023 (the “Revised Billing Article”) and together with the billing article issued in March 2023 (the “Billing Articles”) impacted Medicare coverage for AlloSure Kidney, AlloSure Heart, AlloMap Heart and AlloSure Lung, and required certain companies, including the Company, to implement new processes to address the requirements related to Medicare claim submissions. Noridian adopted the Revised Billing Article on August 17, 2023, with a retroactive effective date of March 31, 2023.
On August 10, 2023, MolDX and Noridian released a draft proposed revision to the LCD (DL38568, Palmetto; DL38629, Noridian) that, if adopted, would revise the existing foundational LCD, MolDX: Molecular Testing for Solid Organ Allograft Rejection (L38568 and L38629). On August 14, 2023, MolDX released a draft billing article (DA58019) to accompany the proposed draft LCD, which generally reflected the changes in coverage included in the Revised Billing Article. The comment period end date for this proposed LCD was September 23, 2023. The Company presented at public meetings regarding the proposed draft LCD held on September 18, 2023 and September 20, 2023, with MolDX and Noridian, respectively. The Company also submitted written comments on the proposed draft LCD.
On February 29, 2024, MolDX and Noridian released a revised version of the Revised Billing Article.
Product Revenue
Product revenue is recognized from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. The Company generally has 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 the risk of loss is passed to the customer upon either shipping or delivery, as per the terms of the agreement.
Patient and Digital Solutions Revenue
Patient and digital solutions revenue is mainly derived from a combination of software as a service (“SaaS”) and perpetual software license agreements entered into with various transplant centers, which are the Company’s customers for this class of revenue. The main performance obligations in connection with the Company’s SaaS and perpetual software license agreements are the following: (i) implementation services and delivery of the perpetual software license, which are considered a single performance obligation, and (ii) post contract support. The Company allocates the transaction price to each performance obligation based on relative stand-alone selling prices of each distinct performance obligation. Digital revenue in connection with perpetual software license agreements is recognized over time based on the Company’s satisfaction of each distinct performance obligation in each agreement.
Perpetual software license agreements typically require advance payments from customers upon the achievement of certain milestones. The Company records deferred revenue in relation to these agreements when cash payments are received or invoices are issued in advance of the Company’s performance, and generally recognizes revenue over the contractual term, as performance obligations are fulfilled.
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In addition, the Company derives patient and digital solutions revenue from software subscriptions and medication sales. The Company generally bills software subscription fees in advance. Revenue from software subscriptions is deferred and recognized ratably over the subscription term. The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay. The Company recognizes revenue from medication sales when prescriptions are delivered.
Recent Accounting Pronouncements
There were no recently adopted accounting standards which would have a material effect on the Company’s condensed consolidated financial statements and accompanying disclosures, and no recently issued accounting standards that are expected to have a material impact on the Company’s condensed consolidated financial statements and accompanying disclosures.
Effective in Future Periods
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosure of significant segment expenses. All current annual disclosures about a reportable segment’s profit or loss and assets will also be required in interim periods. The new guidance also requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”) and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments set forth in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. This ASU will be effective for the Company’s annual disclosures in fiscal year 2024 and interim-period disclosures in fiscal year 2025. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 340): Improvements to Income Tax Disclosures, which requires annual disclosures in the rate reconciliation table to be presented using both percentages and reporting currency amounts, and this table must include disclosure of specific categories. Additional information will also be required for reconciling items that meet a quantitative threshold. The new guidance also requires enhanced disclosures of income taxes paid, including the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions that exceed a quantitative threshold. The amendments should be applied on a prospective basis, but retrospective application is permitted. The amendments set forth in this ASU are effective for annual periods beginning after December 15, 2024 for public entities. This guidance will be effective for the Company’s annual disclosures in fiscal year 2025. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
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.
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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 March 31,
20242023
Numerator:
Net loss used to compute basic and diluted net loss per share$(16,659)$(23,749)
Denominator:
Weighted-average shares used to compute basic and diluted net loss per share
51,692,358 53,643,216 
Net loss per share:
Basic and diluted$(0.32)$(0.44)
The following potentially dilutive securities have been excluded from diluted net loss per share as of March 31, 2024 and 2023 because their effect would be antidilutive:
Three Months Ended March 31,
20242023
Shares of common stock subject to outstanding options2,974,042 3,248,696 
Shares of common stock subject to outstanding common stock warrants 3,132 
Restricted stock units7,244,901 4,096,014 
Total common stock equivalents10,218,943 7,347,842 
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.
The following table sets forth the Company’s financial assets and liabilities, measured at fair value on a recurring basis, as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024
Fair Value Measured Using 
(Level 1)(Level 2)(Level 3)Total Balance
Assets    
Cash equivalents:
Money market funds$73,155 $ $ $73,155 
Total$73,155 $ $ $73,155 
Liabilities
Short-term liabilities:
Contingent consideration$ $ $6,050 $6,050 
Long-term liabilities:
Contingent consideration  1,348 1,348 
Total$ $ $7,398 $7,398 
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December 31, 2023
 Fair Value Measured Using 
 (Level 1)(Level 2)(Level 3)Total Balance
Assets    
Cash equivalents:
Money market funds$60,525 $ $ $60,525 
Total$60,525 $ $ $60,525 
Liabilities
Short-term liabilities:
Contingent consideration$ $ $5,469 $5,469 
Long-term liabilities:
Contingent consideration  2,461 2,461 
Total $ $ $7,930 $7,930 
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)
Contingent Consideration
Balance as of December 31, 2023
$7,930 
Change in estimated fair value of contingent consideration on business combination
319 
Change in estimated fair value of contingent consideration on asset acquisition
(226)
Payments related to contingent consideration(625)
Balance as of March 31, 2024
$7,398 
During March 2023, the Company wrote off $1.0 million of its investment in convertible preferred shares of Cibiltech SAS (“Cibiltech”), which was carried at cost. Cibiltech’s operations have been liquidated. The fair value of this investment was based on Level 3 inputs.
In July 2023, the Company entered into a Securities Holders’ Agreement (the “Agreement”) with a private entity based in France. The private entity was established to continue Cibiltech's activity, which consists of designing, developing, publishing, promoting, distributing, and marketing of software related to predictive solutions, monitoring and/or remote monitoring in the field of human organ allotransplantation, allografting, and chronic organ diseases. The private entity retained all assets of Cibiltech, including its licenses. Pursuant to the Agreement, the Company agreed to invest a certain amount in the private entity, in order to continue the commercialization of the iBox technology. The Company's investment is in the form of ordinary and Class B shares carried at cost. This investment is not considered material to the Company's condensed consolidated financial statements.
In December 2023, Miromatrix was acquired by United Therapeutics Corporation. The Company tendered and sold all of its shares of Miromatrix to United Therapeutics Corporation in the transaction for $2.5 million. The Company recognized a $1.5 million gain from the disposal in Miromatrix and recorded as other income (expense), net at December 31, 2023. There was no outstanding investment with Miromatrix as of March 31, 2024.
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 March 31, 2024 and December 31, 2023, money market funds were included as cash and cash equivalents in 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 based on management’s
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estimate of the probability of success and projected revenues for revenue-based considerations at discounted rates ranging from 7% and 12% at March 31, 2024 and from 6% and 12% at December 31, 2023. 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 income or expense within operating expenses in the condensed consolidated statements of operations until the milestones are paid, expire or are no longer achievable. Increases or decreases in the estimation of the probability percentage results 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.
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):
March 31, 2024March 31, 2023
Cash and cash equivalents$93,299 $74,660 
Restricted cash583 520 
Total cash, cash equivalents and restricted cash at the end of the period
$93,882 $75,180 
Marketable Securities
All short-term marketable securities were considered held-to-maturity at March 31, 2024. At March 31, 2024, 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. The Company assesses whether the decline in value of short-term marketable securities is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. There was no recognition of any other-than-temporary impairment at March 31, 2024. 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.
The long-term marketable equity securities were recorded at fair market value with changes in the fair value recognized in earnings at March 31, 2024 and December 31, 2023. The long-term marketable debt securities were considered available-for-sale at March 31, 2024 and December 31, 2023. The contractual maturity of the long-term marketable debt securities are less than three years.
The amortized cost, gross unrealized holding gains 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):
March 31, 2024
Amortized Cost
Unrealized Holding Gains, Net
Fair Value
Short-term marketable securities:
U.S. agency securities$79,603 $640 $80,243 
Corporate debt securities43,019 587 43,606 
Total short-term marketable securities$122,622 $1,227 $123,849 
December 31, 2023
Amortized Cost
Unrealized Holding Gains, Net
Fair Value
Short-term marketable securities:
U.S. agency securities$80,468 $2,038 $82,506 
Corporate debt securities72,753 711 73,464 
Total short-term marketable securities$153,221 $2,749 $155,970 
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6. BUSINESS COMBINATIONS AND ASSET ACQUISITION
Business Combinations
HLA Data Systems
In January 2023, the Company acquired HLA Data Systems, a Texas-based company that provides software and interoperability solutions for the histocompatibility and immunogenetics community. The Company acquired HLA Data Systems with a combination of cash consideration paid upfront and contingent consideration with a fair value of $1.3 million.
The Company accounted for the transaction as a business combination using the acquisition method of accounting. Acquisition-related costs of $0.4 million associated with the acquisition were expensed as incurred, and classified as part of general and administrative expenses in the condensed consolidated statement of operations.
Goodwill of $2.1 million arising from the acquisition primarily consists of synergies from integrating HLA Data Systems’ technology with the current testing and digital solutions offered by the Company. The acquisition of HLA Data Systems will provide a robust and comprehensive Laboratory Information Management System and support the laboratory workflows. None of the goodwill is expected to be deductible for income tax purposes. All of the goodwill has been assigned to the Company’s existing operating segment.
The following table summarizes the fair values of the intangible assets acquired as of the acquisition date ($ in thousands):
Estimated Fair Value
Estimated Useful Lives (Years)
Customer relationships$3,010 13
Developed technology770 11
Trademarks320 17
Total$4,100 
Customer relationships acquired by the Company represent the fair value of future projected revenue that is expected to be derived from sales of HLA Data Systems’ products to existing customers. The customer relationships’ fair value has been estimated utilizing a multi-period excess earnings method under the income approach, which reflects the present value of the projected cash flows that are expected to be generated by the customer relationships, less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place. The economic useful life was determined based on the distribution of the present value of the cash flows attributable to the intangible asset.
The acquired developed technology represents the fair value of HLA Data Systems’ proprietary software. The trademark acquired consists primarily of the HLA Data Systems brand and markings. The fair value of both the developed technology and the trademark were determined using the relief-from-royalty method under the income approach. This method considers the value of the asset to be the value of the royalty payments from which the Company is relieved due to its ownership of the asset. The royalty rates of 10% and 2% were used to estimate the fair value of the developed technology and the trademark, respectively.
A discount rate of 24% was utilized in estimating the fair value of these three intangible assets.
The pro forma impact of the HLA Data Systems acquisition is not material, and the results of operations of the acquisition has been included in the Company’s condensed consolidated statements of operations from the acquisition date.
MediGO
In July 2023, the Company acquired MediGO, an organ transplant supply chain and logistics company. MediGO provides access to donated organs by digitally transforming donation and transplantation workflows to increase organ utilization. The Company acquired MediGO with a combination of cash consideration paid upfront and contingent consideration with a fair value of $0.3 million.
The Company accounted for the transaction as a business combination using the acquisition method of accounting. Acquisition-related costs of $0.3 million associated with the acquisition were expensed as incurred, and classified as part of general and administrative expenses in the condensed consolidated statement of operations.
Goodwill of $0.6 million arising from the acquisition primarily consists of synergies from integrating MediGO’s technology with the current testing and digital solutions offered by the Company. The acquisition of MediGO will provide a comprehensive software platform that optimizes complex logistics from referral to recovery and during the critical movement of organs and teams and gives organ procurement organizations and transplant centers the ability to unify decentralized stakeholders, coordinate resources and make vital decisions with the goal of increasing organ utilization and improving equity and access to
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transplantation. None of the goodwill is expected to be deductible for income tax purposes. All of the goodwill has been assigned to the Company’s existing operating segment.
The following table summarizes the fair values of the intangible assets acquired as of the acquisition date ($ in thousands):
Estimated Fair Value
Estimated Useful Lives (Years)
Customer relationships$810 17
Developed technology850 12
Trademarks360 17
Total$2,020 
Customer relationships acquired by the Company represent the fair value of future projected revenue that is expected to be derived from sales of MediGO’s products to existing customers. The customer relationships’ fair value has been estimated utilizing a multi-period excess earnings method under the income approach, which reflects the present value of the projected cash flows that are expected to be generated by the customer relationships, less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place. The economic useful life was determined based on the distribution of the present value of the cash flows attributable to the intangible asset.
The acquired developed technology represents the fair value of MediGO’s proprietary software. The trademark acquired consists primarily of the MediGO brand and markings. The fair value of both the developed technology and the trademark were determined using the relief-from-royalty method under the income approach. This method considers the value of the asset to be the value of the royalty payments from which the Company is relieved due to its ownership of the asset. The royalty rates of 10% and 2% were used to estimate the fair value of the developed technology and the trademark, respectively.
A discount rate of 25% was utilized in estimating the fair value of these three intangible assets.
The pro forma impact of the MediGO acquisition is not material, and the results of operations of the acquisition have been included in the Company’s condensed consolidated statements of operations from the respective acquisition date.
Combined Consideration Paid
The following table summarizes the consideration paid for HLA Data Systems (final amount) and MediGO (provisional amount) of the assets acquired and liabilities assumed recognized at their estimated fair value at the acquisition date (in thousands):
Total
Consideration
Cash
$6,682 
Total consideration
$6,682 
Recognized amounts of identifiable assets acquired and liabilities assumed
Current assets$1,413 
Identifiable intangible assets6,120 
Current liabilities(1,060)
Other current liabilities(810)
Contingent considerations(1,620)
Other liabilities(7)
Total identifiable net assets acquired4,036 
Goodwill2,646 
Total consideration$6,682 
The allocation of the purchase price to assets acquired and liabilities assumed was based on the fair value of such assets and liabilities as of the acquisition date.
Asset Acquisition
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Effective as of August 9, 2023, the Company purchased an asset from a private entity. The asset consists of a licensing agreement with a university institution. See also Note 9.
The purchased asset did not meet the definition of a business under ASC Topic 805, Business Combinations, and therefore the Company accounted for the transaction as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather, any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable assets acquired.
Acquisition costs relating to the asset acquired were $2.6 million, comprised of base consideration of $1.8 million, contingent consideration at fair value of $0.5 million and associated transaction costs of $0.3 million. There was only one asset acquired and the entire cost is assigned to the licensing agreement, which is recorded under Intangible assets, net, in the condensed consolidated balance sheets. The licensing agreement has an indefinite life and is presented in notes to the unaudited condensed consolidated financial statements under the intangible assets with indefinite lives category.
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired.
Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or upon the occurrence of certain events or substantive changes in circumstances. There were no indicators of impairment in the three months ended March 31, 2024. The balance of the Company’s goodwill was $40.3 million as of March 31, 2024 and December 31, 2023.
Intangible Assets
The following table presents details of the Company’s intangible assets as of March 31, 2024 ($ in thousands):
March 31, 2024
Gross Carrying AmountAccumulated AmortizationForeign Currency TranslationNet Carrying AmountWeighted Average Remaining Useful Life
(In Years)
Intangible assets with finite lives:
Acquired and developed technology$37,367 $(19,158)$(2,459)$15,750 7.1
Customer relationships25,718 (9,518)(2,213)13,987 9.0
Commercialization rights11,579 (4,812) 6,767 5.3
Trademarks and tradenames5,220 (1,809)(335)3,076 9.2
Total intangible assets with finite lives79,884 (35,297)(5,007)39,580 
Intangible assets with indefinite lives:
Acquired in-process technology1,250 — — 1,250 
Favorable license agreement
2,500 — — 2,500 
Total intangible assets with indefinite lives
3,750 — — 3,750 
Total intangible assets$83,634 $(35,297)$(5,007)$43,330 
The following table presents details of the Company’s intangible assets as of December 31, 2023 ($ in thousands):
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December 31, 2023
Gross Carrying AmountAccumulated AmortizationForeign Currency TranslationNet Carrying AmountWeighted Average Remaining Useful Life
(In Years)
Intangible assets with finite lives:
Acquired and developed technology$37,367 $(18,340)$(2,269)$16,758 7.2
Customer relationships25,718 (9,094)(1,959)14,665 9.2
Commercialization rights11,579 (4,496) 7,083 5.6
Trademarks and tradenames5,220 (1,713)(288)3,219 9.3
Total intangible assets with finite lives79,884 (33,643)(4,516)41,725 
Intangible assets with indefinite lives:
Acquired in-process technology1,250 — — 1,250 
Favorable license agreement
2,726 — — 2,726 
Total intangible assets with indefinite lives
3,976 — — 3,976 
Total intangible assets$83,860 $(33,643)$(4,516)$45,701 
Acquisition of Intangible Assets
In January 2023 and July 2023, the Company acquired the intangible assets of HLA Data Systems and MediGO, respectively. The intangible assets are included in Acquired and developed technology, Customer relationships and Trademarks and tradenames as of March 31, 2024 and December 31, 2023.
Amortization of Intangible Assets
Intangible assets are carried at cost less accumulated amortization. Amortization expenses are recorded to cost of testing services, cost of product, cost of patient and digital solutions, and sales and marketing expenses in the condensed consolidated statements of operations.
The following table summarizes the Company’s amortization expense of intangible assets (in thousands):
Three Months Ended March 31,
20242023
Cost of testing services$329 $329 
Cost of product420 418 
Cost of patient and digital solutions271 248 
Sales and marketing
633 595 
Total$1,653 $1,590 
The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of March 31, 2024 (in thousands):
Years Ending December 31,Cost of Testing ServicesCost of ProductCost of Patient and Digital SolutionsSales and MarketingTotal
Remainder of 2024$987 $1,237 $578 $1,885 $4,687 
20251,316 1,649 681 2,513 6,159 
20261,316 737 681 2,511 5,245 
20271,316 737 681 2,497 5,231 
20281,316 737 681 2,497 5,231 
Thereafter1,509 2,540 1,462 7,516 13,027 
Total future amortization expense$7,760 $7,637 $4,764 $19,419 $39,580 


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8. BALANCE SHEET COMPONENTS
Inventory
Inventory consisted of the following (in thousands):
March 31, 2024December 31, 2023
Finished goods$4,376 $3,658 
Work in progress5,282 5,191 
Raw materials10,472 10,622 
Total inventory$20,130 $19,471 
Accrued and Other Liabilities
Accrued and other liabilities consisted of the following (in thousands):
March 31, 2024December 31, 2023
Clinical studies$15,133 $15,744 
Short-term lease liability6,054 5,943 
Contingent consideration6,050 5,469 
Professional fees4,390 5,911 
Deferred revenue4,356 4,748 
Laboratory processing fees and materials 2,933 2,890 
Deferred payments for intangible assets920 920 
Travel and expenses
891  
Accrued shipping expenses510 335 
Accrued royalty197 348 
License and other collaboration fees88 250 
Capital expenditures 151 
Other accrued expenses4,148 2,788 
Total accrued and other liabilities$45,670 $45,497 
9. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements in Brisbane, California; Columbus, Ohio; West Chester, Pennsylvania; Flowood, Mississippi; Gaithersburg, Maryland; Omaha, Nebraska; Fremantle, Australia; and Stockholm, Sweden. 
The Company’s facility leases expire at various dates through 2033. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
As of March 31, 2024, the carrying value of the ROU asset was $28.6 million. The related current and non-current liabilities as of March 31, 2024 were $6.1 million and $26.9 million, respectively. The current and non-current lease liabilities are included in accrued and other current liabilities and operating lease liability, less current portion, respectively, in the condensed consolidated balance sheets.
The following table summarizes the lease cost for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended
March 31,
20242023
Operating lease cost$1,971 $1,983 
Total lease cost$1,971 $1,983 

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March 31, 2024December 31, 2023
Other information:
Weighted-average remaining lease term - Operating leases (in years)
5.215.43
Weighted-average discount rate - Operating leases (%)
7.1 %7.1 %

Maturities of operating lease liabilities as of March 31, 2024 are as follows (in thousands):
Years Ending December 31,Operating Leases
Remainder of 2024$6,065 
20257,922 
20267,163 
20277,274 
20286,599 
Thereafter4,116 
Total lease payments39,139 
Less imputed interest6,192 
Present value of future minimum lease payments32,947 
Less operating lease liability, current portion6,054 
Operating lease liability, long-term portion$26,893 

Effective March 2024, the Company entered into a sublease agreement with a sub-lessee (a third-party) for office space with a six-year term, commencing on May 1, 2024, for a total of $2.6 million base rent for the duration of the contract.
The following table summarizes the supplemental cash flow information related to leases for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended
March 31,
20242023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases$1,361 $1,333 
Royalty Commitments
The Board of Trustees of the Leland Stanford Junior University (“Stanford”)
In June 2014, the Company entered into a license agreement with Stanford (the “Stanford License”), which granted the Company an exclusive license to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA. Under the terms of the Stanford License, the Company is required to pay an annual license maintenance fee, six milestone payments and royalties in the low single digits of net sales of products incorporating the licensed technology. In March 2023, the Stanford License agreement was amended, which reduced the maximum royalty rate to a lower rate at which the Company may be liable to Stanford effective from April 2022 and also provided that the Company would seek a review from the U.S. Supreme Court (the “Review”). During the pendency of the Review, certain of the Company’s licensing payment and reporting obligations to Stanford with respect to licensed products sold in the U.S. were suspended. As a result, the Company reversed the excess liability in March 2023.
In May 2023, the Company submitted a petition of certiorari to the U.S. Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S. Supreme Court declined to hear this patent infringement suit. As the Review is complete and the Company's petition for review was denied, the Stanford License automatically terminated, and in December 2023, the Company paid Stanford certain past royalties at a reduced rate that were previously suspended within 90 days of the termination. There was no outstanding obligation with Stanford as of March 31, 2024.
Illumina
23

On May 4, 2018, the Company entered into a license agreement with Illumina, Inc. (the “Illumina Agreement”). The Illumina Agreement requires the Company to pay royalties in the mid-single to low-double digits on sales of products covered by the Illumina Agreement.
Other Royalty Commitment
Effective as of August 2023, the Company entered into a license agreement with a university institution (the "University Agreement"). The University Agreement requires the Company to pay royalties in the low single digits on sales of products covered by the University Agreement.
Other Commitments
Pursuant to the Illumina Agreement, the Company has agreed to minimum purchase commitments of finished products and raw materials from Illumina, Inc.
Effective as of July 2023, the Company entered into a license and collaboration agreement with a private entity pursuant to which the Company was granted an irrevocable, non-transferable right to commercialize its proprietary software, iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation for a period of four years with exclusive rights in the United States. The Company will share an agreed-upon percentage of revenue with the private entity, if and when revenues are generated from iBox.
Litigation and Indemnification Obligations
In response to the Companys false advertising suit filed against Natera Inc. (“Natera”) on April 10, 2019, Natera filed a counterclaim against the Company on February 18, 2020, in the U.S. District Court for the District of Delaware (the “Court”) alleging the Company made false and misleading claims about the performance capabilities of AlloSure. The suit seeks injunctive relief and unspecified monetary relief. On September 30, 2020, Natera requested leave of Court to amend its counterclaims to include additional allegations regarding purportedly false claims the Company made with respect to AlloSure, and the Court granted Natera’s request. The trial commenced on March 7, 2022 and concluded on March 14, 2022, with the jury finding that Natera violated the Lanham Act by falsely advertising the scientific performance of its Prospera transplant test and awarding the Company $44.9 million in damages, comprised of $21.2 million in compensatory damages and $23.7 million in punitive damages. In July 2023, the Court upheld and reaffirmed the March 2022 jury verdict but did not uphold the monetary damages awarded by the jury, which the Company intends to appeal. In August 2023, the Court issued an injunction prohibiting Natera from making the claims the jury previously found to be false advertising. The case is now on appeal.
On July 19, 2022, the U.S. Court of Appeals for the Federal Circuit affirmed the Court’s judgment dismissing the Company’s patent infringement suit against Natera. In May 2023, the Company submitted a petition of certiorari to the U.S. Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S. Supreme Court declined to hear the suit.
In addition, Natera filed suit against the Company on January 13, 2020, in the Court alleging, among other things, that AlloSure infringes Natera’s U.S. Patent 10,526,658. This case was consolidated with the Company’s patent infringement suit on February 4, 2020. On March 25, 2020, Natera filed an amendment to the suit alleging, among other things, that AlloSure also infringes Natera’s U.S. Patent 10,597,724. The suit seeks a judgment that the Company has infringed Natera’s patents, an order preliminarily and permanently enjoining the Company from any further infringement of such patents and unspecified damages. On May 13, 2022, Natera filed two new complaints alleging that AlloSure infringes Natera’s U.S. Patents 10,655,180 and 11,111,544. These two cases were consolidated with the patent infringement case on June 15, 2022. On May 17, 2022, Natera agreed to dismiss the case alleging infringement of Natera’s U.S. Patent 10,526,658. On July 6, 2022, the Company moved to dismiss the rest of Natera’s claims. On September 6, 2022, the Company withdrew its motion to dismiss. On December 11, 2023, the Court dismissed the case alleging infringement of Natera's U.S. Patent 10,597,724. Natera appealed that decision. On March 13, 2024, the Federal Circuit dismissed Natera's appeal after Natera failed to file its brief and other required papers. On January 26, 2024, following a five-day trial, a jury concluded that the Company did not infringe Natera's U.S. Patent 10,655,180 but did infringe Natera's U.S. Patent 11,111,544. The jury awarded Natera approximately $96.3 million in damages based on sales of AlloSure and AlloSeq between September 2021 and August 2023. Natera's U.S. Patent 11,111,544 expires in September 2026. The Company anticipates continued litigation as to whether its current AlloSure process infringes the patent. Natera may also move for injunctive relief. The Company is seeking judicial review of the verdict. The Company intends to contest any potential claims of ongoing infringement and any motion for injunctive relief. Natera is also seeking judicial review of the jury’s finding that CareDx did not infringe Natera's U.S. Patent 10,655,180. The Company intends to defend these matters vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail. The Company recognized the damages of $96.3 million as other liabilities on the consolidated balance sheets as of March 31, 2024 and December 31, 2023.
United States Department of Justice and United States Securities and Exchange Commission Investigations
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As previously disclosed, in 2021, the Company received a civil investigative demand (“CID”) from the United States Department of Justice (“DOJ”) requesting that the Company produce certain documents in connection with a False Claims Act investigation being conducted by the DOJ regarding certain business practices related to the Company’s kidney testing and phlebotomy services, and a subpoena from the United States Securities and Exchange Commission (the “SEC”) in relation to an investigation by the SEC in respect of matters similar to those identified in the CID, as well as certain of the Company’s accounting and public reporting practices. By letter dated September 19, 2023, the Company was notified by the staff of the SEC that the SEC has concluded its investigation as to the Company and does not intend to recommend an enforcement action by the SEC against the Company. The notice was provided under the guidelines set out in the final paragraph of Securities Act Release No. 5310.
The Company may receive additional requests for information from the DOJ, the SEC, or other regulatory and governmental agencies regarding similar or related subject matters. The Company does not believe that the CID raises any issues regarding the safety or efficacy of any of the Company’s products or services and is cooperating fully with the DOJ investigation. Although the Company remains committed to compliance with all applicable laws and regulations, it cannot predict the outcome of the DOJ investigation or any other requests or investigations that may arise in the future regarding these or other subject matters.
From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the condensed consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the condensed consolidated financial statements, and (ii) the range of loss can be reasonably estimated.
Olymbios Matter
On April 15, 2022, a complaint was filed by Michael Olymbios against the Company in the Superior Court of the State of California for the County of San Mateo (the “San Mateo County Court”). The complaint alleged that the Company failed to pay certain fees and costs required to continue an arbitration proceeding against Dr. Olymbios, and that the Company has defamed Dr. Olymbios. Dr. Olymbios also sought to void restrictive covenants previously agreed to by him in favor of the Company and to recover damages purportedly incurred by Dr. Olymbios. The Company filed a motion to compel arbitration and dismiss the case. On April 25, 2022, the San Mateo County Court granted the Company’s ex parte application to stay the case and advance the hearing date to June 10, 2022 for the motion to compel arbitration and dismiss. At the June 10, 2022 hearing, the San Mateo County Court found that the decision should be made by the arbitrator, and stayed the case. On July 19, 2022, Dr. Olymbios filed a motion to withdraw from arbitration before Judicial Arbitration and Mediation Services, Inc., which was denied on August 18, 2022. Both the arbitration and the San Mateo County Court matter were settled in the fourth quarter of 2023 and have been resolved.
Securities Class Action
On May 23, 2022, Plumbers & Pipefitters Local Union #295 Pension Fund filed a federal securities class action in the U.S. District Court for the Northern District of California against the Company, Reginald Seeto, its former President, Chief Executive Officer and member of the Company’s Board of Directors, Ankur Dhingra, its former Chief Financial Officer, Marcel Konrad, its former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting, and Peter Maag, its former President, former Chief Executive Officer, former Chairman of the Company’s Board of Directors and current member of the Company’s Board of Directors. The action alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder. The action also alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company. The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ costs incurred in the lawsuit, including their reasonable attorneys’ and experts’ witness fees and other costs.
On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A. and Robbins Geller Rudman & Dowd LLP as lead counsels. Plaintiffs filed an amended complaint on November 28, 2022. On January 27, 2023, defendants moved to dismiss all claims and to strike certain allegations in the amended complaint.
On May 24, 2023, the court granted the Company’s motion to strike and motion to dismiss, dismissing all claims against defendants with leave to amend. On June 28, 2023, plaintiffs filed a second amended complaint against the Company, Reginald Seeto, Ankur Dhingra, and Peter Maag. Under a briefing schedule ordered by the court on June 12, 2023, defendants’ motion to dismiss and motion to strike the second amended complaint was filed on July 26, 2023, plaintiffs’ opposition was filed on
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August 30, 2023, and defendants’ reply was filed on September 22, 2023. The court held oral argument on October 31, 2023. The Company intends to defend itself vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suit, but there is no guarantee that the Company will prevail. The Company has not recorded any liabilities for this suit.
Derivative Actions
On September 21, 2022, Jeffrey Edelman brought a stockholder derivative action complaint in the U.S. District Court for the Northern District of California against the Company as nominal defendant and Drs. Seeto and Maag and Mr. Dhingra, and other current and former members of the Company’s Board of Directors (the Edelman Derivative Action). The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, waste of corporate assets, unjust enrichment and violations of Sections 14(a) and 20(a) of the Exchange Act. The action alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company. The suit seeks a declaration that the individual defendants breached their fiduciary duties to the Company, violated Sections 14(a) and 20(a) of the Exchange Act and were unjustly enriched, and also seeks to recover damages sustained by the Company as a result of the alleged violations, along with the plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’ and experts’ fees, costs and expenses.
On December 8, 2022, the court stayed the Edelman Derivative Action until 20 days after the earlier of the following events: (a) the securities class action is dismissed in its entirety with prejudice; (b) the motion to dismiss in the securities class action is denied; (c) a joint request by plaintiff and defendants to lift the stay; (d) notification that a related derivative action that has been filed is not stayed or is no longer stayed; or (e) notification that there has been a settlement reached in the securities class action or any related derivative action.
On February 7, 2023, Jaysen Stevenson brought a stockholder derivative action complaint in the U.S. District Court for the Northern District of California against the Company as nominal defendant and Drs. Seeto and Maag and Mr. Dhingra and other current and former members of the Company’s Board of Directors (the “Stevenson Derivative Action”). The claims and allegations in the Stevenson Derivative Action are substantially similar to those in the Edelman Derivative Action. The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, waste of corporate assets, unjust enrichment and violations of Sections 14(a) and 20(a) of the Exchange Act. The suit seeks declaratory relief and to recover alleged damages sustained by the Company as a result of the alleged violations, along with the plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’ and experts’ fees, costs and expenses.
On March 9, 2023, the court consolidated the Edelman Derivative Action and the Stevenson Derivative Action and stayed both actions pursuant to the terms of the stay order in the Edelman Derivative Action. On February 8, 2024, Christian Jacobsen filed a stockholder derivative action complaint in the U.S. District Court for the Northern District of California against the Company as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of the Company's Board of Directors (the “Jacobsen Derivative Action”). The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company, violated Section 14(a) of the Exchange Act, are liable for contribution under Sections 10(b) and 21(D) of the Exchange Act, engaged in unjust enrichment, waste of corporate assets, aiding and abetting, insider trading, and misappropriation of information, and/or are liable for indemnification. The suit seeks declaratory relief, disgorgement, and to recover alleged damages sustained by the Company as a result of the alleged violations, along with plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’, accountants’, and experts’ fees, costs, and expenses. On March 20, 2024, the court determined that the Jacobsen Derivative Action is related to the consolidated derivative action.
On March 19, 2024, the parties to the Jacobsen Derivative Action and the consolidated derivative action filed a stipulation and proposed order consolidating the Jacobsen Derivative Action with the consolidated derivative action and staying the Jacobsen Derivative action pursuant to the terms of the stay order in the Edelman Derivative Action. On April 23, 2024, the court entered an order consolidating the Jacobsen Derivative Action with the consolidated derivative action. The order provides that all previous orders in the consolidated derivative action shall apply to the Jacobsen Derivative Action.
On March 20, 2024, Edward W. Burns IRA filed a stockholder derivative action complaint in the Court of Chancery of the State of Delaware against us as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of our Board of Directors (the “Burns Derivative Action”). Prior to filing the complaint, the Company produced documents to the plaintiff in response to a books and records inspection demand made pursuant to Section 220 of the Delaware General Corporation Law. The plaintiff purports to incorporate those documents in the complaint. The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, unjust enrichment, waste of corporate assets, and aiding and abetting breaches of fiduciary duty. The suit seeks declaratory relief, recovery of alleged damages sustained by the Company as a result of the alleged violations, equitable relief, restitution, and plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’, accountants’, and experts’ fees, costs, and expenses. On April 11, 2024, the court entered an order staying the Burns Derivative Action pursuant to a stipulation filed by the parties.
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On May 2, 2024, the court in the consolidated derivative action ordered that the stay of the consolidated derivative action will be lifted as of May 16, 2024.
The Company intends to defend itself vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there are no guarantees that the Company will prevail.
Insurance Matter
In December 2022, the Company filed a lawsuit against its directors and officers liability insurance carriers in San Mateo County Superior Court. The Company seeks a declaration that costs and fees incurred by the Company in responding to governmental investigatory requests are covered under its policies. The Company also asserts breach of contract against its primary insurer Great American Insurance Company for denying the claim. The policies provide up to $15 million in coverage limits. The Company intends to vigorously pursue its claims, and believes it has good and substantial support for its claims, but there is no guarantee that the Company will prevail in these claims. The parties have completed briefing on the Company’s entitlement to coverage under the policies and are awaiting a decision from the Court.
10. 401(K) PLAN
The Company sponsors a 401(k) defined contribution plan (the 401(k) Plan) covering all U.S. employees under the Internal Revenue Code of 1986, as amended. Employee contributions to the 401(k) Plan are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations. The Company incurred expenses related to contributions to the 401(k) Plan of $1.6 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively.
11. WARRANTS
The Company issues common stock warrants in connection with debt or equity financings to lenders, placement agents and investors. Issued warrants are considered standalone financial instruments and the terms of each warrant are analyzed for equity or liability classification in accordance with U.S. GAAP. Warrants that are classified as liabilities usually have various features that would require net-cash settlement by the Company. Warrants that are not liabilities, derivatives and/or meet the exception criteria are classified as equity. Warrants liabilities are remeasured at fair value at each period end with changes in fair value recorded in the condensed consolidated statements of operations until expired or exercised. Warrants that are classified as equity are valued at their relative fair value on the date of issuance, recorded in additional paid-in capital and not remeasured.
As of March 31, 2024 and December 31, 2023, no warrants to purchase common stock were outstanding.
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12. STOCK INCENTIVE PLANS
Stock Options and Restricted Stock Units (“RSU”)
The following table summarizes option and RSU activity under the Company’s 2014 Equity Incentive Plan, 2016 Inducement Equity Incentive Plan and 2019 Inducement Equity Incentive Plan, and related information:
Shares
Available
for Grant
Stock
Options
Outstanding
Weighted-
Average
Exercise
Price
Number of
RSU Shares
Weighted-
Average
Grant Date
Fair Value
Balance—December 31, 2023869,111 3,055,208 $25.21 5,006,775 $19.02 
Additional shares authorized2,060,135 — — — — 
Common stock awards for services(6,813)— — — — 
RSUs granted(2,716,211)— — 2,716,211 9.36 
RSUs vested— — — (319,737)27.50 
Options granted   — — 
Options exercised— (1,501)5.63 — — 
Repurchase of common stock under employee incentive plans65,601 — — — — 
RSUs forfeited158,348 — — (158,348)18.56 
Options forfeited13,190 (13,190)28.32 — — 
Options expired66,475 (66,475)30.46 — — 
Balance—March 31, 2024509,836 2,974,042 $25.08 7,244,901 $15.17 
The total intrinsic value of options exercised was less than $0.1 million for each of the three months ended March 31, 2024 and 2023.
As of March 31, 2024, the total intrinsic value of outstanding RSUs was approximately $78.5 million and there were $63.9 million of unrecognized compensation costs related to RSUs, which are expected to be recognized over a weighted-average period of 2.28 years.
The Company granted performance restricted stock units ("PSUs"), included in RSUs, under the 2014 Plan. The PSUs granted to employees consist of financial and operational metrics to be met over a performance period of 2 years. The number of shares outstanding was 412,843 and 472,116 as of March 31, 2024 and 2023, respectively. The weighted-average remaining recognition period was 0.84 years and 1.74 years for the three months ended March 31, 2024 and 2023, respectively.
Options outstanding that have vested and are expected to vest at March 31, 2024 are as follows:
Number of Shares Issued
(In thousands)
Weighted-Average
Exercise Price
Weighted-Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
(In thousands)
Vested1,982 $25.24 6.53$1,483 
Expected to vest921 24.58 8.38172 
Total2,903 $1,655 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock at March 31, 2024 for stock options that were in-the-money.
The total fair value of options that vested during the three months ended March 31, 2024 was $3.7 million. As of March 31, 2024, there were approximately $14.7 million of unrecognized compensation costs related to stock options, which are expected to be recognized over a weighted-average period of 2.11 years.
2014 Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the “ESPP”), under which employees can purchase shares of its common stock based on a percentage of their compensation, but not greater than 15% of their respective earnings; provided, however, an eligible employee’s right to purchase shares of the Company’s common stock may not accrue at a rate which exceeds $25,000 of the fair market value of such shares for each calendar year in which such rights are outstanding. The ESPP has consecutive offering periods of approximately six months in length. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock on the first day of the offering period or on the exercise date.
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During the offering period in 2023 that ended on December 31, 2023, 73,759 shares were purchased pursuant to the ESPP for aggregate proceeds of $0.5 million from the issuance of such shares, which occurred on January 2, 2024. 
Valuation Assumptions
The estimated fair values of employee stock options and ESPP shares were estimated using the Black-Scholes option pricing model based on the following weighted average assumptions:
Three Months Ended March 31,
20242023
Employee stock options
Expected term (in years)N/A6.0
Expected volatilityN/A78.63%
Risk-free interest rateN/A3.46%
Expected dividend yieldN/A%
Employee stock purchase plan
Expected term (in years)0.50.5
Expected volatility75.91%77.88%
Risk-free interest rate5.38%4.94%
Expected dividend yield%%
Risk-free Interest Rate: The Company based the risk-free interest rate over the expected term of the award based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of grant.
Volatility: The Company used an average historical stock price volatility of its own stock.
Expected Term: The expected term represents the period for which the Company’s stock-based compensation awards are expected to be outstanding and is based on analyzing the vesting and contractual terms of the awards and the holders’ historical exercise patterns and termination behavior.
Expected Dividends: The Company has not paid and does not anticipate paying any dividends in the near future.
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense relating to employee and non-employee stock-based awards for the three months ended March 31, 2024 and 2023, included in the condensed consolidated statements of operations as follows (in thousands):
Three Months Ended March 31,
20242023
Cost of testing services$457 $479 
Cost of product317 360 
Cost of patient and digital solutions372 402 
Research and development1,760 1,962 
Sales and marketing3,044 3,737 
General and administrative7,394 6,814 
Total$13,344 $13,754 
No tax benefit was recognized related to stock-based compensation expense since the Company has never reported taxable income and has established a full valuation allowance to offset all of the potential tax benefits associated with its deferred tax assets. In addition, no amounts of stock-based compensation expense were capitalized for the periods presented.
13. INCOME TAXES
The Company's effective tax rate may vary from the U.S. federal statutory tax rate due to a change in valuation allowance, change in the mix of earnings in tax jurisdictions with different statutory rates, benefits related to tax credits, and the tax impact of non-deductible expenses and other permanent differences between income before income taxes and taxable income.
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For the three months ended March 31, 2024 and 2023, the Company recorded an income tax benefit of $0.1 million and an income tax expense of $0.1 million, respectively. The Company assesses the realizability of its net deferred tax assets by evaluating all available evidence, both positive and negative, including (i) cumulative results of operations in recent years, (ii) sources of recent losses, (iii) estimates of future taxable income, and (iv) the length of net operating loss carryforward periods. The Company believes that based on the history of its U.S. losses and other factors, the weight of available evidence indicates that it is more likely than not that it will not be able to realize its U.S. consolidated net deferred tax assets. The Company has also placed a valuation allowance on the net deferred tax assets of its Sweden operations. Accordingly, the U.S. and Sweden net deferred tax assets have been offset by a full valuation allowance.
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14. SEGMENT REPORTING
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker (“CODM”), or decision making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its Chief Executive Officer as the CODM. In determining its reportable segments, the Company considered the markets and types of customers served and the products or services provided in those markets. The Company operates in a single reportable segment.
Revenues by geographic regions are based upon the customers’ ship-to address for product revenue and the region of testing for testing services revenue. The following table summarizes reportable revenues by geographic regions (in thousands):
Three Months Ended March 31,
20242023
Testing services revenue
United States$53,650 $61,647 
Rest of World187 137 
$53,837 $61,784 
Product revenue
United States$5,276 $3,727 
Europe2,282 2,461 
Rest of World1,036 673 
$8,594 $6,861 
Patient and digital solutions revenue
United States$9,584 $8,506 
Europe27 84 
Rest of World7 27 
$9,618 $8,617 
Total United States$68,510 $73,880 
Total Europe$2,309 $2,545 
Total Rest of World$1,230 $837 
Total$72,049 $77,262 
The following table summarizes long-lived assets, consisting of property and equipment, net, by geographic regions (in thousands):
March 31, 2024December 31, 2023
Long-lived assets:
United States$33,944 $34,714 
Europe416 476 
Rest of World51 56 
Total$34,411 $35,246 
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15. RESTRUCTURING
In January 2023, the Company announced a restructuring plan that is intended to optimize costs and simplify its organizational and corporate structure. The restructuring plan includes the discontinuation of operations at one of its two locations in Fremantle, Australia. The Company expects to complete the closure of the affected location in June 2024. The Company incurred immaterial restructuring charges for the three months ended March 31, 2024.
In May and December 2023, the Company announced a reduction of its workforce to simplify and streamline its organization and strengthen the overall effectiveness of its operations. The restructuring charges are primarily related to employee severance pay and related costs. As a result of this plan, the Company incurred $2.2 million in restructuring charges for the year ended December 31, 2023. The Company did not incur any restructuring charges related to this plan in the three months ended March 31, 2024.




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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission, or the SEC, on February 28, 2024.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “project,” “plan,” “target,” “contemplate,” “predict,” “expect” and the negative and plural forms of these words and similar expressions are intended to identify forward-looking statements.
These forward-looking statements may include, but are not limited to, statements concerning the following:
our ability to generate revenue and increase the commercial success of our current and future testing services, products and patient and digital solutions;
our ability to obtain, maintain and expand reimbursement coverage from payers for our current and other future testing services, if any;
our plans and ability to continue updating our testing services, products and patient and digital solutions to maintain our leading position in transplantations;
the outcome or success of our clinical trial collaborations and registry studies;
the favorable review of our testing services and product offerings, and our future solutions, if any, in peer-reviewed publications;
our ability to obtain additional financing on terms favorable to us, or at all;
our anticipated cash needs and our anticipated uses of our funds, including our estimates regarding operating expenses and capital requirements;
anticipated trends and challenges in our business and the markets in which we operate;
our dependence on certain of our suppliers, service providers and other distribution partners;
disruptions to our business, including disruptions at our laboratories and manufacturing facilities;
our ability to retain key members of our management team;
our ability to make successful acquisitions or investments and to manage the integration of such acquisitions or investments;
our ability to expand internationally;
our compliance with federal, state and foreign regulatory requirements;
our ability to protect and enforce our intellectual property rights, our strategies regarding filing additional patent applications to strengthen our intellectual property rights, and our ability to defend against intellectual property claims that may be brought against us;
our ability to successfully assert, defend against or settle any litigation brought by or against us or other legal matters or disputes;
our ability to remediate the material weaknesses in our internal control over financial reporting as of December 31, 2023; and
our ability to comply with the requirements of being a public company.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially and adversely from those contained in any forward-looking statements we may
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make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all forward-looking statements by these cautionary statements.
Overview and Recent Highlights
CareDx, Inc., or collectively, the Company, we, us and our, together with our 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. We offer testing services, products, and patient and digital solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients.
Highlights for the Three Months Ended March 31, 2024
Reported first quarter revenue of $72.0 million.
Revenue for Testing Services of $53.8 million, an increase of 15% as compared to the fourth quarter 2023.
Grew testing services patients results for the third consecutive quarter to approximately 42,000, an increase of 6% as compared to the fourth quarter 2023.
Over 30 oral presentations, posters and two symposia highlighting CareDx's scientific advancements in heart and lung transplantation presented at the International Society for Heart and Lung Transplantation (ISHLT).
SHORE data presented at ISHLT demonstrated that HeartCare® multimodal testing outperforms donor-derived cell-free DNA (dd-cfDNA) testing alone in identifying allograft rejection.
Expanded payer coverage by 14 million lives nationwide.
Reported first quarter revenue of $9.6 million for Patient and Digital Solutions and $8.6 million for Products, representing year-over-year growth of 12% and 25%, respectively.
Ended the quarter with cash, cash equivalents, and marketable securities of approximately $216 million, with no debt.
Testing Services
We develop and provide diagnostic testing services, including for surveillance, for solid organ transplant recipients, hematopoietic stem cell transplant recipients and recipients of cell therapies.
Kidney
AlloSure Kidney, our transplant surveillance solution, was commercially launched in October 2017 and is our donor-derived cell-free DNA, or dd-cfDNA, offering. In transplantation, there is well-established literature from studies around the world demonstrating the value of dd-cfDNA in the management of solid organ transplantation. AlloSure Kidney is able to discriminate dd-cfDNA from recipient-cell-free DNA targeting polymorphisms in the DNA with an approach specifically designed for transplantation to differentiate dd-cfDNA.
AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination, or LCD, first issued by Palmetto MolDX, or MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, our Medicare Administrative Contractor, or Noridian. The Medicare reimbursement rate for AlloSure Kidney is currently $2,841.
In March and May 2023, MolDX issued new billing articles related to the LCD entitled Molecular Testing for Solid Organ Allograft Rejection. The billing article issued in May 2023, or the Revised Billing Article, and together with the billing article issued in March 2023, the Billing Articles, impacted Medicare coverage for AlloSure Kidney, AlloSure Heart, AlloMap Heart and AlloSure Lung, and required certain companies, including us, to implement new processes to address the requirements
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related to Medicare claim submissions. Noridian adopted the Revised Billing Article on August 17, 2023, with a retroactive effective date of March 31, 2023.
On August 10, 2023, MolDX and Noridian released a draft proposed revision to the LCD (DL38568, Palmetto; DL38629, Noridian) that, if adopted, would revise the existing foundational LCD, MolDX: Molecular Testing for Solid Organ Allograft Rejection (L38568 and L38629). On August 14, 2023, MolDX released a draft billing article (DA58019) to accompany the proposed draft LCD, which generally reflected the changes in coverage included in the Revised Billing Article. The comment period end date for this proposed LCD was September 23, 2023. We presented at public meetings regarding the proposed draft LCD held on September 18, 2023 and September 20, 2023, with MolDX and Noridian, respectively. We also submitted written comments on the proposed draft LCD.
On February 29, 2024, MolDX and Noridian released a revised version of the Revised Billing Article.
AlloSure Kidney has received positive coverage decisions from several commercial payers, and is reimbursed by other private payers on a case-by-case basis.
Multiple studies have demonstrated that significant allograft injury can occur in the absence of changes in serum creatinine. Thus, clinicians have limited ability to detect injury early and intervene to prevent long-term damage using this marker. While histologic analysis of the allograft biopsy specimen remains the standard method used to assess injury and differentiate rejection from other injury in kidney transplants, as an invasive test with complications, repetitive biopsies are not well tolerated. AlloSure Kidney enables more frequent, quantitative and safer assessment of allograft rejection and injury status. Monitoring of graft injury through AlloSure Kidney allows clinicians to optimize allograft biopsies, identify allograft injury and guide immunosuppression management more accurately.
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.
The prospective multicenter trial, or the K-OAR study, completed with over 1,900 patients enrolled, monitors patients with AlloSure Kidney for 3 years with the objective of providing further evidence of clinical utility of AlloSure Kidney in the surveillance of kidney transplant recipients. Preliminary results from the K-OAR study were presented at the CareDx Symposium at the American Transplant Congress held in June 2021. Data from the study are being analyzed and data for contemporary control patients are being collected to enable robust final analyses.
KidneyCare
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 in one surveillance solution. We have yet to submit any applications to private payers for reimbursement coverage of AlloMap Kidney or iBox.
In September 2019, we announced the enrollment of the first patient in the OKRA study, which is an extension of the K-OAR study. OKRA is a prospective, multi-center, observational registry of patients receiving KidneyCare for surveillance. Combined with the K-OAR study, more than 3,000 patients have been enrolled.
Heart
AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection. Since 2008, we have sought to expand the adoption and utilization of our AlloMap Heart solution through ongoing studies to substantiate the clinical utility and actionability of AlloMap Heart, secure positive reimbursement decisions from large private and public payers, develop and enhance our relationships with key members of the transplant community, including opinion leaders at major transplant centers, and explore opportunities and technologies for the development of additional solutions for post-transplant surveillance.
We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers avoid the use of unnecessary, invasive surveillance biopsies and may help to determine the appropriate dosage levels of immunosuppressants. In 2008, AlloMap Heart received 510(k) clearance from the U.S. Food and Drug Administration for marketing and sale as a test in heart transplant recipients who have stable graft function at the time of testing, to aid in the identification of those who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.
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
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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.
Clinical validation data from the Donor-Derived Cell-Free DNA-Outcomes AlloMap Registry (NCT02178943), or D-OAR, was published in the American Journal of Transplant, or AJT, in 2019. D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients. The D-OAR study validated that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.
We have also successfully completed several landmark clinical trials in the transplant field demonstrating the clinical utility of AlloMap Heart for surveillance of heart transplant recipients. We initially established the analytical and clinical validity of AlloMap Heart based on our Cardiac Allograft Rejection Gene Expression Observational (Deng, M. et al., Am. J. Transplantation 2006) study, which was published in the AJT. A subsequent clinical utility trial, Invasive Monitoring Attenuation through Gene Expression (Pham MX et al., N. Eng. J. Med., 2010), published in The New England Journal of Medicine, demonstrated that clinical outcomes in recipients managed with AlloMap Heart surveillance were equivalent (non-inferior) to outcomes in recipients managed with biopsies. The results of our clinical trials have also been presented at major medical society congresses. AlloMap Heart is now recommended as part of the International Society for Heart and Lung Transplantation, or ISHLT, guidelines.
HeartCare
HeartCare includes the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution. An approach to surveillance using HeartCare provides information from two complementary measures: (i) AlloMap Heart – a measure of immune activation, and (ii) AlloSure Heart – a measure of graft injury.
HeartCare provides robust information about distinct biological processes, such as immune quiescence, active injury, acute cellular rejection and antibody mediated rejection. In September 2018, we initiated the SHORE study, a prospective, multi-center, observational, registry of patients receiving HeartCare for surveillance. Patients enrol