CareDx, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The company provides transplant-focused diagnostic testing, products, and patient and digital solutions.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $80.6M | $74.2M | $160.1M | $141.6M |
| Operating loss | $(21.7)M | $(4.7)M | $(40.8)M | $(5.6)M |
| Net loss | $(21.7)M | $(1.9)M | $(41.3)M | $(2.6)M |
| Diluted loss per share | $(0.41) | $(0.04) | $(0.78) | $(0.05) |
| Cash used in operating activities | — | $(25.3)M | $(23.8)M |
- Q2 revenue by category: Testing services $67.1M, product $6.7M, and patient and digital solutions $6.8M. Management reported 45,000 patient test results, up 21% year over year, and a 66% GAAP gross margin.
- Balance sheet and liquidity: At June 30, cash and cash equivalents were $166.8M and marketable securities were $139.4M, totaling $306.2M in cash, cash equivalents, and marketable securities. The company reported no debt, current assets of $403.9M, current liabilities of $78.5M, and an accumulated deficit of $424.5M.
- Cash flows and investing: Investing activities used $155.2M, primarily reflecting $182.9M of marketable-security purchases and $13.1M of capital expenditures, partly offset by maturities. Cash, cash equivalents, and restricted cash declined by $181.7M during the six-month period.
Changes versus prior periods
- Q2 revenue grew 9%; testing-services revenue increased 3%, primarily with more than 7,000 additional patient results. Six-month testing-services revenue rose 8%, with more than 17,000 additional results.
- Patient and digital solutions revenue grew 178% in Q2 and 171% for the first six months, mainly reflecting the 2021 acquisitions of The Transplant Pharmacy and MedActionPlan. Product revenue declined 2% in Q2 but grew 7% for the six-month period.
- Operating expenses rose 30% in Q2 and 36% in the first six months. Higher sales and marketing, research and development, and general and administrative expenses more than offset revenue growth. General and administrative costs included higher legal expenses—up $5.1M in Q2 and $11.5M year to date.
- Net loss widened substantially. Other expense included an unrealized loss on the Miromatrix investment; management cited this as the primary reason other income/expense worsened year over year.
Outlook, risks, and unusual items
- Management said existing liquidity and expected cash from operations and agreements should cover anticipated cash requirements for the next 12 months. It expects continued losses and identified potential future financing needs; no specific revenue or earnings guidance is provided in the filing.
- Medicare represented approximately 54% of total revenue in both the three- and six-month periods. The filing also says Medicare accounted for 65% of Q2 testing-services revenue. Changes to Medicare coverage or reimbursement could materially affect results.
- COVID-19-related staffing constraints and lower transplant volumes may reduce testing demand; the company also cites potential clinical-study, supply-chain, and operating disruptions. Other identified risks include reliance on certain suppliers, a single U.S. testing laboratory, reimbursement uncertainty, and foreign-currency exposure.
- Litigation and investigations: A jury awarded CareDx $44.9M in its false-advertising case against Natera; the award was not recorded pending receipt of cash or other resolution, and post-trial motions remained pending. Separate Natera patent claims against CareDx remained unresolved; CareDx’s patent-infringement judgment was affirmed on appeal in July 2022. DOJ and SEC investigations into certain business practices and related matters were ongoing. A securities class action and an Olymbios matter were also pending; the company recorded no liabilities for these suits.
- Capital and facilities: An at-the-market agreement permits up to $200M of common-stock sales; the filing reports no ATM proceeds for the six months ended June 30. The company relocated its headquarters to Brisbane in July 2022 and entered a six-year lease, with initial rent of approximately $127,000 per month and annual increases.
- Disclosure controls and procedures were assessed as effective as of June 30, 2022; the company reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether patient-test growth and reimbursement coverage sustain testing-services revenue growth, particularly given Medicare concentration.
- Whether expense growth—especially legal, commercial, and research costs—slows enough to improve operating performance and cash use.
- Developments in the Natera litigation, the $44.9M jury award, and the DOJ and SEC investigations; the award is not recognized in reported results.
- Cash and marketable-security levels, future capital needs, and any dilution from the available $200M ATM program.
- Transplant volumes, COVID-19 effects, and supply availability, including dependencies on the U.S. laboratory and key suppliers.