CareDx, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; this filing reports full-year results, not standalone Q4 results. CareDx is a transplant-focused precision medicine company offering diagnostic testing, transplant-related products and digital solutions. Its principal testing services are AlloSure Kidney, AlloMap Heart and AlloSure Heart.
Key financial results
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $192.2 million | $127.1 million |
| Testing services revenue | $163.6 million | $104.6 million |
| Product revenue | $19.3 million | $18.3 million |
| Digital and other revenue | $9.3 million | $4.2 million |
| Operating loss | $22.5 million | $24.5 million |
| Net loss | $18.7 million | $22.0 million |
| Operating cash flow | $33.4 million provided | $2.8 million used |
| Cash, cash equivalents and marketable securities | $224.7 million | $38.2 million |
| Debt outstanding | None | None reported |
Revenue grew 51% year over year. Testing services represented 85% of 2020 revenue; testing-services revenue grew 56%, principally reflecting more than 29,000 additional test results. Product revenue increased 6%, while digital and other revenue increased 119%, primarily reflecting Ottr and XynManagement acquisitions and software implementations. Based on reported revenue and costs of revenue, gross margin was approximately 67% in 2020 versus 64% in 2019; this is an analyst calculation. Net loss per share was $0.40, compared with $0.52.
Operating expenses rose to $214.7 million from $151.6 million, including R&D of $48.9 million (up 59%), sales and marketing of $53.9 million (up 38%), and general and administrative expense of $48.8 million (up 34%). The G&A increase included $6.0 million in legal fees. Operating cash flow included a $20.5 million CMS advance-payment refund liability and $4.8 million of CARES Act Provider Relief Fund income; the company repaid the CMS advance in January 2021. Investing cash outflow was $100.4 million, including $90.0 million used to purchase marketable securities. Financing cash inflow was $163.1 million, mainly from equity offerings.
Material developments and outlook
- AlloSure Heart obtained Medicare coverage effective December 2020 when used with AlloMap Heart; its stated Medicare reimbursement rate is $2,753. AlloSure Kidney and AlloMap Heart rates are $2,841 and $3,240, respectively.
- COVID-19 reduced testing volume in late March and April and delayed product demonstrations and OKRA study enrollment. Management said testing volumes recovered to pre-pandemic levels by May and remained at or above them through year-end; OKRA was delayed about six months.
- CareDx launched RemoTraC home blood draws and AlloCare, and commercially launched AlloSeq HCT. Management reported more than 6,000 patients enrolled in RemoTraC and more than 150 transplant centers able to offer it.
- Management said available cash and expected operating cash were expected to meet anticipated needs for at least the next 12 months and beyond. This is not formal revenue or earnings guidance. After year-end, CareDx raised approximately $188.7 million net in a public offering and acquired TransChart for cash.
- The company reported a history of losses and expected continued net losses in coming years. Key risks include dependence on Medicare reimbursement and a limited set of leading tests, adoption and payer-coverage uncertainty, competitive and regulatory changes, COVID-related disruption, reliance on a single U.S. testing laboratory and certain sole-source suppliers, and clinical-development execution.
- CareDx is litigating with Natera over alleged false advertising and patent infringement claims relating to AlloSure. Natera seeks injunctive and unspecified monetary relief; trial was scheduled for July 2021. CareDx recorded no liability for these suits and said it intended to defend them.
Investor facts to verify
- Whether test volumes and reimbursement collections support continued growth, especially given Medicare’s material contribution to testing-services revenue.
- How much reported operating cash flow reflected the CMS advance-payment liability and other nonrecurring pandemic-related support.
- Whether AlloSure Heart coverage, broader private-payer coverage and clinical evidence translate into durable adoption and collections.
- Progress and outcomes for K-OAR, OKRA and SHORE, and the timing and reimbursement prospects of newer products and digital offerings.
- Developments in Natera litigation, supplier continuity and the financial and integration effects of the TransChart acquisition and subsequent equity financing.
Audit: Deloitte issued an unqualified opinion on the financial statements and internal controls over financial reporting as of December 31, 2020. The auditor identified testing-services revenue estimation as a critical audit matter.