CareDx, Inc. [CDNA] Filings

10-Q 1 cdna-20240630.htm 10-Q cdna-20240630

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 June 30, 2024


☐			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)

__________________________________________________


Delaware						94-3316839
(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 Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	CDNA	The 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 filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller 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 52,740,008 shares of the registrant’s Common Stock issued and outstanding as of July 29, 2024.

Table of Contents

CareDx, Inc.

TABLE OF CONTENTS


			Page No.
PART I. FINANCIAL INFORMATION			3
Item 1. Unaudited Condensed Consolidated Financial Statements			3
Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023			4
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023			5
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023			6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023			8
Notes to Unaudited Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk			48
Item 4. Controls and Procedures			48

PART II. OTHER INFORMATION			50
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 3. Defaults Upon Senior Securities			58
Item 4. Mine Safety Disclosures			59
Item 5. Other Information			59
Item 6. Exhibits			60
Signatures			62

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PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CareDx, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	95,782	$	82,197
Marketable securities	133,089		153,221
Accounts receivable	66,161		51,061
Inventory	19,234		19,471
Prepaid and other current assets	6,343		7,763
Total current assets	320,609		313,713
Property and equipment, net	34,202		35,246
Operating leases right-of-use assets	27,188		29,891
Intangible assets, net	41,896		45,701
Goodwill	40,336		40,336
Restricted cash	588		586
Other assets	1,958		1,353
Total assets	$	466,777	$	466,826
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,874	$	12,872
Accrued compensation	25,004		19,703
Accrued and other liabilities	47,453		45,497

Total current liabilities	78,331		78,072
Deferred tax liability	50		136

Deferred payments for intangible assets	1,620		2,461
Operating lease liability, less current portion	25,386		28,278
Other liabilities	96,721		96,551
Total liabilities	202,108		205,498
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000,000 shares authorized at June 30, 2024 and December 31, 2023; no shares issued and outstanding at June 30, 2024 and December 31, 2023	—		—
Common stock: $0.001 par value; 100,000,000 shares authorized at June 30, 2024 and December 31, 2023; 52,617,443 and 51,503,377 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	50		49
Additional paid-in capital	969,427		946,511
Accumulated other comprehensive loss	(7,964)		(6,963)
Accumulated deficit	(696,844)		(678,269)
Total stockholders’ equity	264,669		261,328
Total liabilities and stockholders’ equity	$	466,777	$	466,826

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CareDx, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Testing services revenue	$	70,918	$	53,414	$	124,755	$	115,198
Product revenue	10,610		7,876		19,204		14,737
Patient and digital solutions revenue	10,746		9,011		20,364		17,628
Total revenue	92,274		70,301		164,323		147,563
Operating expenses:
Cost of testing services	14,308		15,324		27,940		30,620
Cost of product	6,245		3,926		11,589		7,992
Cost of patient and digital solutions	7,393		6,637		14,351		13,241
Research and development	19,678		20,233		38,389		44,590
Sales and marketing	21,002		21,630		40,832		44,861
General and administrative	27,678		29,327		54,589		57,359
Restructuring costs	68		848		68		848
Total operating expenses	96,372		97,925		187,758		199,511
Loss from operations	(4,098)		(27,624)		(23,435)		(51,948)
Other income:
Interest income, net	2,826		2,871		5,711		5,537
Change in estimated fair value of common stock warrant liability	—		3		—		10
Other expense, net	(100)		(271)		(390)		(2,245)
Total other income	2,726		2,603		5,321		3,302
Loss before income taxes	(1,372)		(25,021)		(18,114)		(48,646)
Income tax (expense) benefit	(22)		68		61		(56)
Net loss	$	(1,394)	$	(24,953)	$	(18,053)	$	(48,702)
Net loss per share (Note 3):
Basic	$	(0.03)	$	(0.46)	$	(0.35)	$	(0.91)
Diluted	$	(0.03)	$	(0.46)	$	(0.35)	$	(0.91)
Weighted-average shares used to compute net loss per share:
Basic	52,195,620		53,846,260		51,943,989		53,745,299
Diluted	52,195,620		53,846,260		51,943,989		53,745,299

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CareDx, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net loss	$	(1,394)	$	(24,953)	$	(18,053)	$	(48,702)
Other comprehensive gain (loss):
Foreign currency translation adjustment, net of tax	144		(1,011)		(1,001)		(947)
Comprehensive loss	$	(1,250)	$	(25,964)	$	(19,054)	$	(49,649)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CareDx, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2023	51,503,377	$	49	$	946,511	$	(6,963)	$	(678,269)	$	261,328

Issuance of common stock under employee stock purchase plan	73,759	—		532		—		—		532
Repurchase and retirement of common stock	(55,500)	—		—		—		(522)		(522)
RSU settlements, net of shares withheld	252,662	—		(668)		—		—		(668)
Issuance of common stock for services	6,813	—		56		—		—		56
Issuance of common stock for cash upon exercise of stock options	1,501	—		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, 2024	51,782,612	49		959,734		(8,108)		(695,450)		256,225


RSU settlements, net of shares withheld	811,360	1		(3,601)		—		—		(3,600)
Issuance of common stock for services	4,935	—		49		—		—		49
Issuance of common stock for cash upon exercise of stock options	18,536	—		123		—		—		123

Employee stock-based compensation expense	—	—		13,122		—		—		13,122
Foreign currency translation adjustment, net of tax	—	—		—		144		—		144
Net loss	—	—		—		—		(1,394)		(1,394)
Balance at June 30, 2024	52,617,443	$	50	$	969,427	$	(7,964)	$	(696,844)	$	264,669

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CareDx, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	53,533,250	$	52	$	898,806	$	(7,503)	$	(460,444)	$	430,911
Issuance of common stock under employee stock purchase plan	47,025	—		456		—		—		456
Repurchase and retirement of common stock	(59,472)	—		—		—		(690)		(690)
RSU settlements, net of shares withheld	123,910	—		(785)		—		—		(785)
Issuance of common stock for services	7,649	—		93		—		—		93
Issuance of common stock for cash upon exercise of stock options	820	—		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
Repurchase and retirement of common stock	(12,000)	—		—		—		(67)		(67)
RSU settlements, net of shares withheld	362,710	—		(1,508)		—		—		(1,508)
Issuance of common stock for services	3,647	—		36		—		—		36
Issuance of common stock for cash upon exercise of stock options	2,930	—		6		—		—		6
Issuance of common stock upon exercise of warrants	3,132	—		26		—		—		26
Employee stock-based compensation expense	—	—		12,663		—		—		12,663
Foreign currency translation adjustment, net of tax	—	—		—		(1,011)		—		(1,011)
Net loss	—	—		—		—		(24,953)		(24,953)
Balance at June 30, 2023	54,013,601	$	52	$	923,514	$	(8,450)	$	(509,903)	$	405,213

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CareDx, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities:
Net loss	$	(18,053)	$	(48,702)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	26,514		26,454
Depreciation and amortization	7,364		7,093
Asset impairments and write-downs	—		1,000
Amortization of right-of-use assets	2,816		2,652
Unrealized loss on long-term marketable equity securities	—		852
Revaluation of contingent consideration to estimated fair value	529		488


Amortization of premium and accretion of discount on short-term marketable securities, net	821		(2,091)
Revaluation of common stock warrant liability to estimated fair value	—		(10)
Changes in operating assets and liabilities:
Accounts receivable	(15,207)		15,225
Inventory	(225)		12
Prepaid and other assets	769		2,101
Operating lease liabilities, net	(2,882)		(2,677)
Accounts payable	(6,920)		14
Accrued compensation	5,504		(2,528)
Accrued and other liabilities	2,693		289
Change in deferred taxes	(86)		—
Net cash provided by operating activities	3,637		172
Investing activities:
Acquisitions of business, net of cash acquired	—		(4,562)

Purchases of short-term marketable securities	(93,212)		(135,271)
Maturities of short-term marketable securities	112,523		145,643
Purchase of corporate equity securities	—		(100)
Additions of capital expenditures	(3,277)		(5,133)
Net cash provided by investing activities	16,034		577
Financing activities:



Proceeds from issuance of common stock under employee stock purchase plan	532		456
Taxes paid related to net share settlement of restricted stock units	(4,266)		(2,164)
Proceeds from exercise of warrants	—		4
Proceeds from exercise of stock options	131		7

Payment of contingent consideration on acquisitions	(2,000)		(250)
Repurchase and retirement of common stock	(522)		(757)
Net cash used in financing activities	(6,125)		(2,704)
Effect of exchange rate changes on cash and cash equivalents	41		(118)
Net increase (decrease) in cash, cash equivalents and restricted cash	13,587		(2,073)
Cash, cash equivalents and restricted cash at beginning of period	82,783		90,443
Cash, cash equivalents and restricted cash at end of period	$	96,370	$	88,370

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.

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.

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 $696.8 million at June 30, 2024. As of June 30, 2024, the Company had cash, cash equivalents and marketable securities of $228.9 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 on May 9, 2024 and May 23, 2024. The Securities and Exchange Commission (“SEC”) declared the Registration Statement effective on May 23, 2024, and as a result, 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 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 six months ended June 30, 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. There were no repurchases during the three months ended June 30, 2024. As of June 30, 2024, $21.4 million remained available for future share repurchases under the Repurchase Program.

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 and six months ended June 30, 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

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business combination or an asset acquisition (including identifiable intangible assets acquired); the fair value of contingent consideration recorded in connection with a business combination or an asset acquisition; the grant date fair value assumptions used to estimate stock-based compensation expense; income taxes; impairment of long-lived assets and indefinite-lived assets (including goodwill); and legal contingencies. Actual results could differ from those estimates.

Concentrations of Credit Risk and Other Risks and Uncertainties

For the three months ended June 30, 2024 and 2023, approximately 42% and 44%, respectively, of total revenue was derived from Medicare. For the six months ended June 30, 2024 and 2023, approximately 38% and 43%, respectively, of total revenue was derived from Medicare.

As of June 30, 2024 and December 31, 2023, approximately 32% and 36%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable at either June 30, 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 June 30, 2024, the Company’s short-term marketable securities consisted of corporate debt securities with maturities of greater than three months but less than 12 months at the time of purchase, which were classified as current assets on the condensed consolidated balance sheets.

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 sheets 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 June 30, 2024, the Company’s leases had remaining terms of 0.25 years to 8.59 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, the Company's discussions with payers, and other pertinent information. In addition, consistent with ASC 606-10-25-1, the Company continues to assess whether it is probable that it will collect substantially all of the consideration to which it will be entitled when determining if a contract with a customer exists.

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.

During the second quarter of 2024, based upon additional information gained through discussions with payers, the receipt of other information, and increasing cash reimbursements over a sustained period of time, the Company evaluated all relevant facts and circumstances and concluded a contract was established for specific tests in accordance with ASC Topic 606, Revenue from Contracts with Customers. For the three months ended June 30, 2024, the Company recognized $13.2 million in revenue for the tests performed in prior periods, as all performance obligations were satisfied at the time the contract was established.

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 in the contract. The products are delivered and risk of loss passed to the customer upon either shipping or delivery, as per the terms of the agreement. There are no further performance obligations related to a contract and revenue is recognized at the point of delivery consistent with the terms of the contract or purchase order.

Patient and Digital Solutions Revenue

Patient and digital solutions revenue is primarily 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

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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.

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 had a material effect 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 an 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. The Company is currently evaluating the potential effect that the updated standard will have on its 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. The Company is currently evaluating the potential effect that the updated standard will have on its 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net loss used to compute basic and diluted net loss per share	$	(1,394)	$	(24,953)	$	(18,053)	$	(48,702)
Denominator:
Weighted-average shares used to compute basic and diluted net loss per share	52,195,620		53,846,260		51,943,989		53,745,299
Net loss per share:
Basic and diluted	$	(0.03)	$	(0.46)	$	(0.35)	$	(0.91)

The following potentially dilutive securities have been excluded from diluted net loss per share as of June 30, 2024 and 2023 because their effect would be antidilutive:


	Three and Six Months Ended June 30,
	2024	2023
Outstanding common stock options	3,783,013	3,383,661


Outstanding restricted stock units	6,663,430	5,190,029
Total common stock equivalents	10,446,443	8,573,690

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 June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024
	Fair Value Measured Using
	(Level 1)		(Level 2)		(Level 3)		Total Balance
Assets
Cash equivalents:
Money market funds	$	60,187	$	—	$	—	$	60,187



Total	$	60,187	$	—	$	—	$	60,187
Liabilities
Short-term liabilities:
Contingent consideration	$	—	$	—	$	4,743	$	4,743
Long-term liabilities:
Contingent consideration	—		—		1,620		1,620

Total	$	—	$	—	$	6,363	$	6,363

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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	529
Change in estimated fair value of contingent consideration on asset acquisition	(96)

Payments related to contingent consideration	(2,000)
Balance as of June 30, 2024	$	6,363

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 of Miromatrix and recorded as other income (expense), net at December 31, 2023. There was no outstanding investment in Miromatrix as of June 30, 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 June 30, 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% to 12% at June 30, 2024 and from 6% to 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):


	June 30, 2024		June 30, 2023
Cash and cash equivalents	$	95,782	$	87,786
Restricted cash	588		584
Total cash, cash equivalents and restricted cash at the end of the period	$	96,370	$	88,370

Marketable Securities

All short-term marketable securities were considered held-to-maturity at June 30, 2024. At June 30, 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 June 30, 2024. All short-term marketable securities with unrealized losses as of the balance sheet date have been in a loss position for less than 12 months. Contractual maturities of the short-term marketable securities were within one year or less.

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):


	June 30, 2024
	Amortized Cost		Unrealized Holding Gains, Net		Fair Value
Short-term marketable securities:
U.S. agency securities	$	90,403	$	1,268	$	91,671
Corporate debt securities	42,686		365		43,051
Total short-term marketable securities	$	133,089	$	1,633	$	134,722


	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 securities	72,753		711		73,464
Total short-term marketable securities	$	153,221	$	2,749	$	155,970

6. BUSINESS COMBINATIONS AND ASSET ACQUISITION

Business Combinations

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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 statements 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 technology	770		11
Trademarks	320		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 statements 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 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):

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	Estimated Fair Value		Estimated Useful Lives (Years)
Customer relationships	$	810	17
Developed technology	850		12
Trademarks	360		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 and contingent considerations	$	6,682
Total consideration	$	6,682

Recognized amounts of identifiable assets acquired and liabilities assumed
Current assets	$	1,413
Identifiable intangible assets	6,120
Current liabilities	(1,060)
Other current liabilities	(810)
Contingent considerations	(1,620)
Other liabilities	(7)
Total identifiable net assets acquired	4,036
Goodwill	2,646
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

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,

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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 and six months ended June 30, 2024 and 2023. The balance of the Company’s goodwill was $40.3 million as of June 30, 2024 and December 31, 2023.

Intangible Assets

The following table presents details of the Company’s intangible assets as of June 30, 2024 ($ in thousands):


	June 30, 2024
	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation		Net Carrying Amount		Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
Acquired and developed technology	$	37,367	$	(19,935)	$	(2,444)	$	14,988	6.9
Customer relationships	25,718		(9,936)		(2,191)		13,591		8.8
Commercialization rights	11,579		(5,128)		—		6,451		5.1
Trademarks and tradenames	5,220		(1,904)		(331)		2,985		8.9

Total intangible assets with finite lives	79,884		(36,903)		(4,966)		38,015
Intangible assets with indefinite lives:
Acquired in-process technology	1,250		—		—		1,250
Favorable license agreement	2,631		—		—		2,631
Total intangible assets with indefinite lives	3,881		—		—		3,881
Total intangible assets	$	83,765	$	(36,903)	$	(4,966)	$	41,896

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 Amount		Accumulated Amortization		Foreign Currency Translation		Net Carrying Amount		Weighted 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 relationships	25,718		(9,094)		(1,959)		14,665		9.2
Commercialization rights	11,579		(4,496)		—		7,083		5.6
Trademarks and tradenames	5,220		(1,713)		(288)		3,219		9.3

Total intangible assets with finite lives	79,884		(33,643)		(4,516)		41,725
Intangible assets with indefinite lives:
Acquired in-process technology	1,250		—		—		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 Acquired and developed technology, Customer relationships, and Trademarks and tradenames are recorded under Intangible assets, net, in the condensed consolidated balance sheets as of June 30, 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of testing services	$	329	$	329	$	658	$	658
Cost of product	411		416		831		834
Cost of patient and digital solutions	238		255		509		503
Sales and marketing	628		606		1,261		1,201
Total	$	1,606	$	1,606	$	3,259	$	3,196

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of June 30, 2024 (in thousands):


Years Ending December 31,	Cost of Testing Services		Cost of Product		Cost of Patient and Digital Solutions		Sales and Marketing		Total
Remainder of 2024	$	658	$	828	$	340	$	1,259	$	3,085
2025	1,316		1,656		681		2,517		6,170
2026	1,316		739		681		2,515		5,251
2027	1,316		739		681		2,501		5,237
2028	1,316		739		681		2,501		5,237
Thereafter	1,509		2,543		1,462		7,521		13,035
Total future amortization expense	$	7,431	$	7,244	$	4,526	$	18,814	$	38,015

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8. BALANCE SHEET COMPONENTS

Inventory

Inventory consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Finished goods	$	4,803	$	3,658
Work in progress	4,014		5,191
Raw materials	10,417		10,622
Total inventory	$	19,234	$	19,471

Accrued and Other Liabilities

Accrued and other liabilities consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Clinical studies	$	16,766	$	15,744
Professional fees	6,091		5,911
Short-term lease liability	6,062		5,943
Deferred revenue	5,852		4,748
Contingent consideration	4,743		5,469
Laboratory processing fees and materials	3,431		2,890
Deferred payments for intangible assets	818		920
Travel and expenses	767		—
Accrued shipping expenses	487		335
Capital expenditures	235		151
Accrued royalty	222		348
License and other collaboration fees	—		250
Other accrued expenses	1,979		2,788
Total accrued and other liabilities	$	47,453	$	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 June 30, 2024, the carrying value of the ROU asset was $27.2 million. The related current and non-current liabilities as of June 30, 2024 were $6.1 million and $25.4 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.

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 lease cost for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease cost	$	1,965	$	1,972	$	3,936	$	3,955

Total lease cost	$	1,965	$	1,972	$	3,936	$	3,955

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	June 30, 2024		December 31, 2023
Other information:
Weighted-average remaining lease term - Operating leases (in years)	5.01		5.43

Weighted-average discount rate - Operating leases (%)	7.1	%	7.1	%

Maturities of operating lease liabilities as of June 30, 2024 are as follows (in thousands):


Years Ending December 31,	Operating Leases
Remainder of 2024	$	4,010
2025	7,929
2026	7,164
2027	7,274
2028	6,599
Thereafter	4,115
Total lease payments	37,091
Less imputed interest	5,643
Present value of future minimum lease payments	31,448
Less operating lease liability, current portion	6,062
Operating lease liability, less current portion	$	25,386

The following table summarizes the supplemental cash flow information related to leases for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	1,468	$	1,366	$	2,829	$	2,699

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 June 30, 2024.

Illumina

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

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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

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.

Natera Inc.

In response to the Company’s 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 May 30, 2024, Natera filed a second notice of appeal of the dismissal of U.S. Patent 10,597,724. On June 19, 2024, the Company moved to dismiss Natera’s appeal.

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 has moved for an injunction on the Company’s prior AlloSure process. The Company is opposing the motion. Natera

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may also move for injunctive relief over the Company’s current AlloSure process if it is found to infringe. 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 the Company 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 condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.

United States Department of Justice and United States Securities and Exchange Commission Investigations

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 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.

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 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 Drs. Seeto and Maag and Mr. Dhingra, and other current and former members of the Company's Board of Directors asserting, among other things, alleged breaches of fiduciary duty against the Individual Defendants based on the factual allegations of the Securities Class Action (the “Edelman Derivative Action”).

On December 8, 2022, the court entered an order staying the Edelman Derivative Action subject to certain terms and conditions.

On February 7, 2023, Jaysen Stevenson 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 Drs. Seeto and Maag and Mr. Dhingra, and other current and former members of the Company’s Board of Directors asserting substantially similar claims (the “Stevenson Derivative Action”).

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 us as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of the Company's Board of Directors asserting substantially similar claims as the prior-filed derivative actions (the “Jacobsen Derivative Action”).

On March 19, 2024, the parties to the Jacobsen Derivative Action and the consolidated Edelman Derivative Action and Stevenson Derivative Action filed a stipulation and proposed order consolidating the Jacobsen Derivative Action with the consolidated Edelman Derivative Action and Stevenson 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 all three derivative actions (the “Consolidated Derivative Action”). The order provides that all previous orders in the Edelman Derivative Action and the Stevenson Derivative Action shall apply to the Jacobsen Derivative Action.

On May 16, 2024, the court lifted the stay in the Consolidated Derivative Action. Under a scheduling order entered by the court on May 14, 2024, plaintiffs filed an amended complaint in the Consolidated Derivative Action on July 1, 2024. Pursuant to a briefing notice entered by the court on June 17, 2024, defendants’ deadline to file a motion to dismiss is August 30, 2024, plaintiffs’ deadline to file an opposition brief is October 29, 2024, and defendants’ deadline to file a reply brief is December 2, 2024. A motion hearing is scheduled for January 28, 2025.

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 the Company as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of the 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.

On May 30, 2024, the parties to the Burns Derivative Action filed an amended stipulation and proposed order to continue the stay in that action, which was so-ordered by the court on May 31, 2024.

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.

Insurance Matter

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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.

On May 17, 2024, the Superior Court entered a decision finding against the Company. The Company is considering its appellate options.

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 $0.5 million for each of the three months ended June 30, 2024 and 2023. The Company incurred expenses related to contributions to the 401(k) Plan of $2.1 million and $1.2 million for the six months ended June 30, 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 June 30, 2024 and December 31, 2023, no warrants to purchase common stock were outstanding.

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, 2019 Inducement Equity Incentive Plan and 2024 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, 2023	869,111	3,055,208	$	25.21	5,006,775	$	19.02
Additional shares authorized	6,748,645	—	—		—	—
Common stock awards for services	(11,748)	—	—		—	—
RSUs granted	(3,360,339)	—	—		3,360,339	9.32
RSUs vested	—	—	—		(1,456,490)	18.14
Options granted	(854,898)	854,898	9.29		—	—
Options exercised	—	(20,037)	6.54		—	—
Repurchase of common stock under employee incentive plans	391,535	—	—		—	—
RSUs forfeited	247,195	—	—		(247,195)	17.32
Options forfeited	21,809	(21,809)	27.94		—	—
Options expired	85,247	(85,247)	30.19		—	—
Balance—June 30, 2024	4,136,557	3,783,013	$	21.58	6,663,429	$	14.54

The total intrinsic value of options exercised was less than $0.1 million for each of the three and six months ended June 30, 2024 and 2023.

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As of June 30, 2024, the total intrinsic value of outstanding RSUs was approximately $106.1 million and there were $

CareDx, Inc. [CDNA] Filings
10-Q	[2024-07-31]
10-Q	[2024-05-09]
10-K	[2024-02-28]
10-Q	[2023-11-08]
10-Q	[2023-08-08]
10-Q	[2023-05-10]
10-K	[2023-02-27]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-10-28]
10-Q	[2021-07-29]
10-Q	[2021-05-05]
10-K	[2021-02-24]
10-Q	[2020-10-29]
10-Q	[2020-08-04]
10-Q	[2020-04-30]
10-K	[2020-02-28]
10-Q	[2019-10-31]
10-Q	[2019-08-01]
10-Q	[2019-05-08]
10-K	[2019-03-06]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-22]
10-Q	[2017-11-09]
S-1	[2017-09-01]
S-1	[2017-08-25]
10-Q	[2017-08-11]
10-Q	[2017-06-09]
S-1	[2017-04-26]
10-K	[2017-04-21]
10-Q	[2016-11-14]
10-Q	[2016-08-22]
10-Q	[2016-05-16]
10-K	[2016-03-29]
10-Q	[2015-11-13]
10-Q	[2015-08-12]
10-Q	[2015-05-14]
10-K	[2015-03-31]
10-Q	[2014-11-14]
10-Q	[2014-08-28]
S-1	[2014-06-03]