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CareDx, Inc.

CareDx, Inc.CDNAEarnings & Financial Report

Nasdaq

What changed in CareDx, Inc.'s 10-K — 2023 vs 2024

Top changes in CareDx, Inc.'s 2024 10-K

470 paragraphs added · 755 removed · 358 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

101 edited+57 added−140 removed66 unchanged
Federal and State Fraud and Abuse and Privacy Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs and across the healthcare system. Our business is subject to compliance with these laws.
Federal and State Fraud, Abuse and Privacy Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs and across the healthcare system. Our business is subject to compliance with these laws.
Violations of the Anti-Kickback Statute also are actionable under the federal False Claims Act. Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to items or services reimbursed by any third-party payer, including commercial insurers.
Violations of the Anti-Kickback Statute are also actionable under the federal False Claims Act. Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to items or services reimbursed by any third-party payer, including commercial insurers.
AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination, or LCD, first issued by Palmetto MolDX, or MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, our Medicare Administrative Contractor, or Noridian.
AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination, or LCD, first issued by Palmetto MolDX, or MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, our Medicare Administrative Contractor (MAC), or Noridian.
We expect the competition for post-transplant surveillance to increase as there are several established and early-stage companies in the process of developing products and services for the transplant market that may directly or indirectly compete with AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart or our development pipeline.
We expect the competition for post-transplant surveillance to increase as there are several established and early-stage companies in the process of developing products and services for the transplant market that may directly or indirectly compete with AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, or our development pipeline.
Manufacturing We have historically purchased many of the components and raw materials used in our product kits from numerous suppliers worldwide. For reasons of quality assurance, sole source availability or cost effectiveness, certain components and critical raw materials used in the manufacture of our products are available only from one supplier.
Lab Products Manufacturing We have historically purchased many of the components and raw materials used in our product kits from numerous suppliers worldwide. For reasons of quality assurance, sole source availability or cost effectiveness, certain components and critical raw materials used in the manufacture of our products are available only from one supplier.
Laboratories performing high complexity testing are required to meet more stringent personnel and quality system requirements than laboratories performing less complex tests. To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards.
Laboratories performing high complexity testing are required to meet more stringent personnel and quality system requirements than laboratories performing less complex tests. To renew our CLIA certificate, we are subject to inspection every two years to assess compliance with program standards.
State Privacy Laws U.S. state privacy laws, such as the California Consumer Privacy Act, or the CCPA, which took effect in January 2020, and was amended by the California Privacy Rights Act effective January 2023, secure new privacy rights for consumers and impose new obligations on us.
State Privacy Laws U.S. state privacy laws, such as the California Consumer Privacy Act, or the CCPA, which took effect in January 2020, and was amended by the California Privacy Rights Act, or the CPRA, effective January 2023, secure new privacy rights for consumers and impose new obligations on us.
The Affordable Care Act expands the government’s investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments to both the Anti-Kickback Statute and the False Claims Act, to make it easier to bring suit under these statutes.
The Affordable Care Act expands the government’s investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments to both the Anti-Kickback Statute and the False Claims Act, to make it easier to bring a suit under these statutes.
An LDT is a test developed by a single laboratory for use only in that laboratory, such as our testing services, AlloMap Heart, AlloSure Kidney, AlloSure Lung and AlloSure Heart.
An LDT is a test developed by a single laboratory for use only in that laboratory, such as our testing services, AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung.
The Affordable Care Act also allocates additional resources and tools for the government to police healthcare fraud, with expanded subpoena power for HHS, additional funding to investigate fraud and abuse across the healthcare system and expanded use of recovery audit contractors for enforcement. There have previously been public announcements by members of the U.S.
The Affordable Care Act also allocates additional resources and tools for the government to police healthcare fraud, with expanded subpoena power for HHS, additional funding to investigate fraud and abuse across the healthcare system and expanded use of recovery audit contractors for enforcement. There have previously been public announcements by President Trump and members of the U.S.
Food and Drug Administration for marketing and sale as a test in heart transplant recipients who have stable graft function at the time of testing, to aid in the identification of those who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.
Food and Drug Administration for marketing and sales as a test in heart transplant recipients who have stable graft function at the time of testing, to aid in the identification of those who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.
We believe the principal competitive factors in our target markets include: • quality and strength of clinical and analytical validation data; • confidence in diagnostic results; 17 Table of Contents • technical performance and innovation to deliver new products that provide clinically actionable results; • reputation among customers as a provider of high value transplant diagnostic tests and diagnostic test services; • the extent of reimbursement; • inclusion in practice guidelines; • cost-effectiveness; and • ease of use.
We believe the principal competitive factors in our target markets include: • quality and strength of clinical and analytical validation data; • confidence in diagnostic results; • technical performance and innovation to deliver new products that provide clinically actionable results; • reputation among customers as a provider of high value transplant diagnostic tests and diagnostic test services; • the extent of reimbursement; • inclusion in practice guidelines; • cost-effectiveness; and • ease of use.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
AlloMap Heart has been a covered service for Medicare beneficiaries since January 1, 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart.
AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. AlloSure Heart has been a covered service for Medicare beneficiaries since December 2020. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart.
Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests. In the field of post-transplant surveillance, Natera Inc., or Natera, and Eurofins Transplant Genomics, Inc., or Eurofins, and Oncocyte Inc., or Oncocyte, have commercially available molecular diagnostics tests .
Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests. In the field of post-transplant surveillance, Natera, Inc., or Natera, and Eurofins Transplant Genomics, Inc., or Eurofins, Devyser Diagnostics AB, or Devyser, and Oncocyte Corporation, or Oncocyte, have commercially available molecular diagnostics tests .
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX will develop advanced analytics that integrate AlloSure with large transplant databases to provide clinical data solutions.
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX are developing advanced analytics that integrate AlloSure testing with large transplant databases to provide clinical data solutions.
As of December 31, 2023, substantially all of our revenues came from the United States and Europe, and substantially all of our assets and operations were located in the United States, Sweden and Australia. We are organized and operate as a single reportable segment.
As of December 31, 2024, substantially all of our revenues came from the United States and Europe, and substantially all of our assets and operations were located in the United States and Sweden. We are organized and operate as a single reportable segment.
Our commercially available testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA, or 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.
Our Products and Services Our commercially available post-transplant testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA, or dd-cfDNA, solution for kidney transplant patients, AlloMap® Heart, a gene expression profiling 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.
We were inspected as part of the customary College of American Pathologists audit and recertified in March 2022 as a result of passing that inspection. We expect the next regular inspection under the CLIA to occur in 2024.
We were inspected as part of the customary College of American Pathologists audit and recertified in 2024 as a result of passing that inspection. We expect the next regular inspection under the CLIA to occur in 2026.
Our main buildings headquartered in California are energy efficiency certified and meet stringent San Francisco Bay Area requirements for environmental impact, and several of our offices are in new energy efficient buildings.
Our main buildings headquartered in California are energy efficiency certified and meet stringent San Francisco Bay Area requirements for environmental impact, and several of 18 Table of Contents our offices are in new energy efficient buildings.
Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our product portfolio includes AlloSeq Tx, QTYPE, Olerup SSP, AlloSeq HCT, and AlloSeq cfDNA.
We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help provide post-transplant surveillance. Our Lab Product portfolio includes QTYPE, Olerup SSP and SBT, AlloSeq Tx, AlloSeq HCT, and AlloSeq cfDNA.
Other states have similarly adopted privacy laws which took effect in 2023, including Virginia, Colorado, Utah and Connecticut. Additionally, Delaware, Indiana, Iowa, Montana, Oregon, Tennessee and Texas also adopted privacy laws, which take effect from July 1, 2024 through 2026.
Other states have similarly adopted privacy laws which took effect in 2023, including 16 Table of Contents Virginia, Colorado, Utah and Connecticut. Additionally, Delaware, Indiana, Iowa, Montana, Oregon, Tennessee and Texas also adopted privacy laws, which take effect from July 1, 2024 through 2026.
HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution. An approach to surveillance using HeartCare provides information from the two complementary measures: (i) AlloMap Heart – a measure of immune activation; and (ii) AlloSure Heart – which measures graft injury.
HeartCare HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA technology of AlloSure Heart in one surveillance solution. An approach to surveillance using HeartCare provides information from two complementary measures: (i) AlloMap Heart – a measure of immune system status, and (ii) AlloSure Heart – a measure of graft injury.
These trade secrets and know-how are found particularly in technical areas such as optimized systems for making precise and reproducible q-PCR, measurements, and in the analysis of genomic data and algorithm development. AlloMap, AlloSure, AlloSeq, AlloCell, AlloHeme, QTYPE, Ottr and CareDx are registered trademarks of ours in the United States.
We have developed trade secrets and know-how since our inception. These trade secrets and know-how are found particularly in technical areas such as optimized systems for making precise and reproducible q-PCR, measurements, and in the analysis of genomic data and algorithm development. AlloMap, AlloSure, AlloSeq, AlloCell, AlloHeme, QTYPE, Ottr and CareDx are registered trademarks of ours in the United States.
We believe employee career development is an investment in our employees’ skills and our future. We offer our employees various training opportunities free of charge and during working hours. For example, in 2022, we launched the LinkedIn 23 Table of Contents Learning platform, a learning library and repository for self-guided personal and professional learning opportunities for our employees.
We believe employee career development is an investment in our employees’ skills and our future. We offer our employees various training opportunities free of charge and during working hours. For example, we use the LinkedIn Learning platform, a learning library and repository for self-guided personal and professional learning opportunities for our employees.
We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers 6 Table of Contents avoid the use of unnecessary, invasive surveillance biopsies and may help to determine the appropriate dosage levels of immunosuppressants.
We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers avoid the use of unnecessary invasive surveillance biopsies, and may help to determine the appropriate dosage levels of immunosuppressants by measuring activity of the immune system.
Under the CLIA, administered by CMS, we are required to hold a certificate applicable to the type of work we perform and to comply with standards covering personnel, facilities administration, quality systems, proficiency testing and performance.
Under the CLIA, administered by the Centers for Medical and Medicaid Services (CMS), we are required to hold a certificate applicable to the type of work we perform and to comply with standards covering personnel, facilities administration, quality systems, proficiency testing and performance.
None of our other employees are represented by a union or are subject to collective bargaining agreements. We have never experienced a work stoppage and believe that our relations with our employees are good. We have a zero-tolerance policy for discrimination.
None of our other employees are represented by a union or are subject to collective bargaining agreements. We have never experienced a work stoppage and believe that our relations with our employees are good.
Typing with QTYPE requires approximately one hour compared to the up to 2-3 hours that it takes to do traditional SSP typing and the 5-7 hours that it takes with sequence-specific oligonucleotides, or SSO. Olerup SSP is used to type HLA alleles based on the SSP technology. The Olerup SSP product line comprises products for low to high-resolution HLA typing.
Typing with QTYPE requires one hour compared to the up to 2-3 hours that it takes to do traditional SSP typing and the 5-7 hours that it takes with sequence-specific oligonucleotides, or SSO. Olerup SSP is used to type HLA alleles based on the sequence specific primer, or SSP, technology.
These products include: AlloSeq Tx, a high-resolution HLA typing solution; AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients; and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. Our AlloSeq products are designed to run on Illumina’s NGS instrumentation.
Distributed NGS Kits for HLA Typing and Transplant Monitoring Our distributed NGS products include: AlloSeq Tx, a high-resolution HLA typing solution; AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect injury and active rejection in transplant recipients; and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients.
License Agreements We may in the future rely, at least in part, upon licensing agreements with third parties to obtain patent rights and transfers of technology, information and know-how that enable us to further our development of additional solutions for post-transplant surveillance.
License Agreements We may in the future rely, at least in part, upon licensing agreements with third parties to obtain patent rights and transfers of technology, information and know-how that enable us to further our development of additional solutions for post-transplant surveillance. Of the seven existing U.S. patents related to transplant rejection and autoimmunity, four are exclusively licensed.
In March 2023, we entered into a license and collaboration agreement with a private entity pursuant to which we were 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.
In March 2023, we entered into a license and collaboration agreement with a private entity pursuant to which we were 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. 13 Table of Contents Regulation Our business is subject to and impacted by frequently changing laws and regulations in the United States and internationally.
Apart from regular weekly meetings with managers, monthly town hall meetings and quarterly earnings reports and calls, we also conduct annual anonymous employee surveys to understand current employee sentiment, areas we are excelling in as well as areas for improvement.
In addition, we believe it is important to have regular engagement with our employees to understand their needs. Apart from regular weekly meetings with managers, monthly town hall meetings and quarterly earnings reports and calls, we also conduct annual anonymous employee surveys to understand current employee sentiment, areas we are excelling in as well as areas for improvement.
We also face competition from hospital and commercial reference labs that develop their own in-house testing solutions. We believe that our product line competes favorably with Thermo Fisher as a leading supplier of HLA test kits based on performance, reputation and service. We expect future competition for post-transplant surveillance kitted solutions for AlloSeq cfDNA and AlloSeq HCT.
We also face competition from hospital and commercial reference labs that develop their own in-house testing solutions. We 12 Table of Contents believe that our product line competes favorably with Thermo Fisher as a leading supplier of HLA test kits based on performance, reputation and service.
Six issued patents for HLA genotyping are licensed as part of this agreement. In April 2020, we entered into a license agreement with Cornell University pursuant to which we were granted exclusive rights to four patents covering methods and technology for measurement of gene expression in urine to diagnose kidney transplant rejection.
In April 2020, we entered into a license agreement with Cornell University pursuant to which we were granted exclusive rights to four U.S. patents covering methods and technology for the measurement of gene expression in urine to diagnose kidney transplant rejection.
In July 2007, we changed our name to XDx, Inc. and in March 2014, we changed our name to CareDx, Inc. Our principal executive offices are located at 8000 Marina Boulevard, Brisbane, California and our telephone number is (415) 287-2300. Our software solutions are currently used in over 170 transplant centers in the U.S.
In July 2007, we changed our name to XDx, Inc. and in March 2014, we changed our name to CareDx, Inc. Our principal executive offices are located at 8000 Marina Boulevard, Brisbane, California and our telephone number is (415) 287-2300.
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).
The Medicare reimbursement rate for AlloSure Kidney is currently $2,841. On August 10, 2023, MolDX and Noridian released a draft proposed revision to the LCD (DL38568, Palmetto; DL38629, Noridian) that, if adopted, would have revised the existing foundational LCD, MolDX: Molecular Testing for Solid Organ Allograft Rejection (L38568 and L38629).
We cannot predict whether future healthcare initiatives, including at the federal level, will be initiated or the effect any such initiatives could have on our business, financial condition or results of operations.
Congress regarding their plans to repeal and replace the Affordable Care Act. We cannot predict whether future healthcare initiatives, including at the federal level, will be initiated or the effect any such initiatives could have on our business, financial condition or results of operations.
Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors—developers of certified health information technology, health information networks / health information exchanges, and healthcare providers (including laboratories)—from engaging in activities that are likely to interfere with the access, exchange or use of electronic health information (information blocking).
The law includes a limited number of exceptions, some of which closely align with corresponding Anti-Kickback Statute exceptions and safe harbors and others that materially differ. 15 Table of Contents Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors—developers of certified health information technology, health information networks / health information exchanges, and healthcare providers (including laboratories)—from engaging in activities that are likely to interfere with the access, exchange or use of electronic health information (information blocking).
We also are subject to inspections and audits by governmental agencies. Below are certain key regulations applicable to our business. Clinical Laboratory Improvement Amendments of 1988 Having a clinical laboratory in California, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business.
Clinical Laboratory Improvement Amendments of 1988 Having a clinical laboratory in California, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business.
In the event that we are unable to obtain sufficient quantities of raw materials or components on commercially reasonable terms or in a timely manner, our ability to manufacture our products on a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations. 16 Table of Contents Our manufacturing facility in Stockholm, Sweden is used to support the production, packaging and labeling of our proprietary test kits: Olerup SSP and QTYPE.
In the event that we are unable to obtain sufficient quantities of raw materials or components on commercially reasonable terms or in a timely manner, our ability to manufacture our products on a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations.
In addition, California laws mandate proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory. We are required to maintain compliance with California standards as a condition to continued operation of our laboratory in California.
In addition, California laws mandate proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory. We are required to maintain compliance with California standards as a condition to continue operation of our laboratory in California. Other States’ Laboratory Testing Other states require out-of-state laboratories that accept specimens for testing from those states to be licensed.
In 2008, AlloMap Heart received 510(k) clearance from the U.S.
AlloMap Heart has 510(k) clearance from the U.S.
Where applicable, these restrictions generally prohibit us from billing patients or certain governmental or private payers for clinical laboratory testing services when the physician ordering the test, or any member of such physician’s immediate family, has an investment interest in, or compensation arrangement with, us, unless the arrangement meets an exception to the prohibition. 20 Table of Contents Both the Stark Law and PORA contain exceptions for compensation paid to a physician for personal services rendered by the physician, provided that certain conditions are satisfied.
Where applicable, these restrictions generally prohibit us from billing patients or certain governmental or private payers for clinical laboratory testing services when the physician ordering the test, or any member of such physician’s immediate family, has an investment interest in, or compensation arrangement with, us, unless the arrangement meets an exception to the prohibition.
Anti-Kickback Statutes The federal healthcare programs’ Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for referring an individual for the furnishing of or arranging for the furnishing of any good or service, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid, or the purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, services, or item payable under such programs. 21 Table of Contents The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payment of cash and waivers of payments.
Anti-Kickback Statutes The federal healthcare programs’ Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for referring an individual for the furnishing of or arranging for the furnishing of any good or service, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid, or the purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item payable under such programs.
The IVDR requirements are applied starting May 26, 2022. The European Commission recently confirmed adoption of a proposal 22 Table of Contents for a progressive rollout of the IVDR to prevent disruption in the supply of in vitro diagnostic products to the market.
The European Commission recently confirmed adoption of a proposal for a progressive rollout of the IVDR to prevent disruption in the supply of in vitro diagnostic products to the market.
Our senior leadership team includes leaders with diverse skills, experience, racial backgrounds and genders. Our employees come from numerous countries and various backgrounds and we strive to provide a diverse and inclusive environment.
We have increased the diversity of our Board of Directors and leadership teams and continue to focus on maintaining a diverse organization. Our senior leadership team includes leaders with diverse skills, experience, racial backgrounds and genders. Our employees come from numerous countries and various backgrounds and we strive to provide a diverse and inclusive environment.
This technology enables the most comprehensive sequencing, covering more of the HLA genes than other solutions on the market and adding coverage of non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx 17 received CE mark authorization in May 2020.
AlloSeq Tx is the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology. This technology enables the most comprehensive sequencing, covering more of the HLA genes than other solutions on the market as well as non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx17 received CE mark authorization in May 2020.
In June 2020, we launched AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
Devices considered to meet the essential requirements must bear the CE marking of conformity, placed by the manufacturer, when introduced on the market. A manufacturer placing devices on the market in its name must notify its national competent authorities. These CE labeled products are also falling under requirements of the In Vitro Diagnostic Regulation (2017/746) (IVDR).
A manufacturer placing devices on the market in its name must notify its national competent authorities. These CE-labeled products are also falling under the requirements of the In Vitro Diagnostic Regulation (2017/746) (IVDR). The IVDR requirements were applied starting May 26, 2022.
The ACROBAT study is a prospective, multicenter, observational cohort study to evaluate the use of AlloHeme, a microchimerism NGS tool to predict post-transplant relapse in patients with allogeneic hematopoietic cell transplants, or HCT. This study is currently enrolling patients.
In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/HCT transplant using AlloHeme Testing (ACROBAT) study. The ACROBAT study is a prospective, multicenter, observational cohort study to evaluate the use of AlloHeme, an NGS tool to predict post-transplant relapse in patients with allogeneic hematopoietic cell transplants, or HCT.
Of the 10 existing U.S. patents related to transplant rejection and autoimmunity, four are the product of an exclusive licensing agreement. In May 2018, we entered into the License Agreement with Illumina, which provides us with worldwide distribution, development and commercialization rights to Illumina’s next generation sequencing product line for use in transplantation diagnostic testing.
In May 2018, we entered into a license and commercialization agreement with Illumina, which provides us with worldwide distribution, development and commercialization rights to Illumina’s next generation sequencing product line for use in transplantation diagnostic testing. Six issued U.S. patents for HLA genotyping are licensed as part of this agreement.
The common policy LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian). The Medicare reimbursement rate for AlloSure Heart is currently $2,753. The Revised Billing Article requires certain companies, including CareDx, to implement new processes to address the requirements related to Medicare claim submissions.
The common policy LCD is titled “MolDX: Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian). The Medicare reimbursement rate for AlloSure Heart is currently $2,753.
We also offer 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. We provide digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management, or Ottr, and XynManagement, Inc., or XynManagement.
We also offer high-quality products in the pre-transplant space that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. We also provide digital transplant solutions and various offerings that help transplant centers with patient management, outcomes quality and operational support.
In connection with this, the FDA proposed a rule that would amend its regulations to make explicit that in vitro diagnostic products are devices under the Federal Food, Drug and Cosmetic Act. There is no assurance whether, or when, this proposed policy and/or rule will be adopted or as to the content of any policies or rules eventually adopted.
In connection with this, the FDA proposed a rule that would amend its regulations to make explicit that in vitro diagnostic products are devices under the Federal Food, Drug and Cosmetic Act.
Finally, other states have self-referral restrictions with which we have to comply that differ from those imposed by federal and California law.
Further, a violation of PORA is a misdemeanor and could result in civil penalties and criminal fines. Finally, other states have self-referral restrictions with which we have to comply that differ from those imposed by federal and California law.
In some cases, violators of the GDPR or UK GDPR may be fined up to €20 million or up to 4% of the annual worldwide turnover of the preceding financial year in case of an enterprise, whichever is greater.
In some cases, violators of the GDPR or UK GDPR may be fined up to €20 million or up to 4% of the annual worldwide turnover of the preceding financial year in case of an enterprise, whichever is greater. 17 Table of Contents Our business or financial results may be adversely impacted by adhering to these regulatory requirements and the related costs of ensuring and maintaining compliance .
For all tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis. If a reimbursement claim is denied, we generally pursue payment through the particular payer’s appeal process. International Our lab products have a broad international presence.
For all tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis.
We would need to obtain FDA approval or clearance for any existing tests currently offered as LDTs, and subsequent to commercialization of any new tests.
We would need to obtain FDA approval or clearance for any existing tests currently offered as LDTs, and subsequent to commercialization of any new tests. 14 Table of Contents Health Insurance Portability and Accountability Act Under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, the U.S.
Ottr was formed in 1993 and is a leading provider of transplant patient management software, or the Ottr software, which provides comprehensive solutions for transplant patient management. The Ottr software enables integration with electronic medical records, or EMR, systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.
Our Ottr software consists of two unique offerings, Ottr Organ and Ottr Cellular, which provide comprehensive solutions for transplant patient management and enable integration with electronic medical records, or EMR, systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.
Regulation Our business is subject to and impacted by frequently changing laws and regulations in the United States and internationally. These laws and regulations include regulations particular to our business and laws and regulations relating to conducting business generally (e.g., U.S. Foreign Corrupt Practices Act, Sarbanes-Oxley Act, and similar laws of other jurisdictions).
These laws and regulations include regulations particular to our business and laws and regulations relating to conducting business generally (e.g., U.S. Foreign Corrupt Practices Act, Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and similar laws of other jurisdictions). We also are subject to inspections and audits by governmental agencies. Below are certain key regulations applicable to our business.
The diagnostics industry is characterized by rapid product development and technological advances, which require an adept and skilled workforce.
As of December 31, 2024, 589 employees were located in the United States and 61 were located outside of the United States. The diagnostics industry is characterized by rapid product development and technological advances, which require an adept and skilled workforce.
We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements and reasonable security measures. As of December 31, 2023, we had 10 issued U.S. patents related to transplant rejection and autoimmunity.
We rely on a combination of patents, copyrights, trademarks, material and data transfer agreements and licenses to protect our intellectual property rights. We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements and reasonable security measures.
We believe that our laboratory capacity will be adequate to meet demand for AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart and other tests in the development pipeline for the next few years. When a clinician orders AlloMap Heart, a blood sample is drawn and processed and sent via overnight courier to our laboratory.
We believe that our laboratory capacity will be adequate to meet demand for AlloSure Kidney, AlloMap Heart and AlloSure Heart, HeartCare and AlloSure Lung and other tests in the development pipeline for the next few years. There are two types of samples received at the laboratory.
The test results are typically reported to the ordering clinician within two business days of receipt of the sample. Test samples that fail to meet quality control criteria are immediately re-tested and the ordering clinician is notified of the need to re-test if turnaround time will be affected.
Regardless of the test requested, the test results are typically reported to the ordering clinician within two business days from receipt of the sample. Test samples that fail to meet quality control criteria and have enough remaining material are re-tested on the next available batch of samples, which may extend the turnaround time.
The product line includes close to 150 different typing products. We offer one of the most up-to-date and comprehensive libraries of HLA typing kits based on SSP technology. TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq.
The Olerup SSP product line comprises products for low to high-resolution HLA typing. The product line includes close to 170 different typing products. We offer one of the most up-to-date and comprehensive libraries of HLA typing kits based on SSP technology.
However, we cannot be certain that regulators would find these arrangements to be in compliance with the Stark Law, PORA or similar state laws. Further, a violation of PORA is a misdemeanor and could result in civil penalties and criminal fines.
We have structured these arrangements with terms intended to address the requirements of the applicable exceptions to the Stark Law, PORA and other similar state laws. However, we cannot be certain that regulators would find these arrangements to be in compliance with the Stark Law, PORA or similar state laws.
There are several established and early-stage companies in the process of developing products and services for the transplant market that may directly or indirectly compete with our development pipeline. In addition, companies that have not historically focused on transplantation, but have knowledge of dd-cfDNA technology, have indicated they are considering the transplantation market.
We expect future competition for post-transplant surveillance kitted solutions for AlloSeq cfDNA and AlloSeq HCT. There are several established and early-stage companies in the process of developing products and services for the transplant market that may directly or indirectly compete with our development pipeline.
We currently produce products, which are CE labeled and subject to the In Vitro Diagnostic Medical Devices Directive (98/79/EC), or IVDD, a European Union, or EU, directive. Some of our products are currently labeled by self-declaration based on their intended use or certified by a Notified Body for Compliance to the IVDD requirements.
Foreign Jurisdictions Laws and regulations outside of the United States also apply to our products. We currently produce products, which are CE labeled and subject to the In Vitro Diagnostic Medical Devices Directive (98/79/EC), or IVDD, a European Union, or EU, directive.
Cellular Therapy In April 2020, we initiated a 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. AlloCell is being commercialized through research agreements with biopharma companies developing cell therapies.
AlloCell AlloCell, our solution for cell therapy such as CAR-T therapy, monitors the pharmacokinetics of engraftment and persistence of cells for patients who have received allogeneic cell therapy. AlloCell is currently being utilized in research partnerships with biopharma companies developing cell therapies.
We have compensation arrangements with a number of physicians for personal services, such as speaking engagements and clinical advisory boards. We have structured these arrangements with terms intended to address the requirements of the applicable exceptions to the Stark Law, PORA and other similar state laws.
Both the Stark Law and PORA contain exceptions for compensation paid to a physician for personal services rendered by the physician, provided that certain conditions are satisfied. We have compensation arrangements with a number of physicians for personal services, such as speaking engagements and clinical advisory boards.
A product that is not CE marked is automatically considered to be non-compliant. Appointed national enforcement agencies monitor the market for violations and imported products are checked for compliance at customs offices. No in vitro device or accessory may be placed on the market or put into service unless it satisfies the essential requirements set forth in the IVDD.
Some of our products are currently labeled by self-declaration based on their intended use or certified by a Notified Body for Compliance to the IVDD requirements. A product that is not CE marked is automatically considered to be non-compliant. Appointed national enforcement agencies monitor the market for violations and imported products are checked for compliance at customs offices.
The facility maintains a valid EC certificate for compliance to Directive 98/79/EC Annex IV, excluding Sections 4 and 6, Full Quality Assurance System In Vitro Diagnostic Medical Devices, and is certified to standards ISO 13485: 2016 and the Canadian Medical Devices Conformity Assessment System, or CMDCAS, for Medical Devices, undergoing the same certification and surveillance audit requirements.
The facility maintains a valid EC certificate for compliance to Directive 98/79/EC Annex IV, excluding Sections 4 and 6, Full Quality Assurance System In Vitro Diagnostic Medical Devices. Annual surveillance audits are also conducted by the site’s notified body to ensure ongoing compliance.
Test samples that fail to meet quality control criteria are immediately re-tested and the ordering clinician is notified of the need to re-test if turnaround time will be affected. We rely solely on certain suppliers to provide some of the laboratory instruments and key reagents that we use to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, and AlloSure Heart testing.
We rely solely on certain suppliers to provide some of the laboratory instruments and key reagents that we use to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung testing.
Heart AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.
AlloMap Heart Our first product launched in 2005, AlloMap Heart is an innovative gene expression profiling test that is intended to aid clinicians in identification of heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection at the time of testing in conjunction with standard clinical assessment.
ITEM 1. BUSINESS Company Overview CareDx, Inc., or “CareDx” or the “Company” or “we” or “us” and “our”, together with our subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers.
ITEM 1. BUSINESS Company Overview CareDx is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers. We offer testing services, products, and patient and digital solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients.
In 2023, we added contract manufacturing in the U.S. and Europe to our global manufacturing capabilities to support our growth.
In 2023, we added contract manufacturing in the U.S. and Europe to our global manufacturing capabilities to support our growth. Additionally, we seek to manufacture to current Good Manufacturing Practice requirements and our QMS is implemented in accordance with FDA Quality System Regulations.
Coverage policies approving AlloMap Heart have approached nearly 90% of all covered lives and are published by many of the largest private payers, including several BCBS plans and UnitedHealthcare. Many other payers have positive coverage policies for AlloMap Heart. AlloSure Heart and AlloSure Kidney are covered by several commercial payers.
We are reimbursed for a substantial portion of the AlloMap Heart tests we perform on patients covered by private payers. Coverage policies approving AlloMap Heart have approached nearly 90% of all covered lives and are published by many of the largest private payers, including Blue Cross Blue Shield, or BCBS payers as well as national payers.
As part of our acquisition of TransChart in January 2021, we acquired Tx Access, 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, we acquired the Transplant Hero patient application.
TxAccess is 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. MedActionPlan provides medication safety, medication adherence and patient education. MedActionPlan is a leader in patient medication management for transplant patients and beyond.
QTYPE enables Human Leukocyte Antigen, or HLA, typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time polymerase chain reaction, or PCR, methodology. Olerup SSP is used to type HLA alleles based on the sequence specific primer, or SSP, technology.
Distributed PCR Kits for HLA Typing 8 Table of Contents QTYPE enables Human Leukocyte Antigen, or HLA, typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time polymerase chain reaction, or PCR, methodology. QTYPE primarily focuses on typing where rapid typing results are required, such as for deceased donor typing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Specifically, we may need to raise additional capital to, among other things: • develop other solutions for clinical surveillance in transplantation; • increase our selling and marketing efforts to drive market adoption and address competitive developments; • expand our clinical laboratory operations; • fund our clinical validation study activities; • expand our research and development activities; • sustain or achieve broader commercialization of AlloSure Kidney, AlloSure Lung, KidneyCare, AlloMap Heart, AlloSure Heart, HeartCare, our products and patient and digital solutions or enhancements to those tests, products and patient and digital solutions; • acquire or license products or technologies including through acquisitions; and • finance our capital expenditures and general and administrative expenses.
Specifically, we may need to raise additional capital to, among other things: • develop other solutions for clinical surveillance in transplantation; • increase our selling and marketing efforts to drive market adoption and address competitive developments; • expand our clinical laboratory operations; • fund our clinical validation study activities; • expand our research and development activities; • sustain or achieve broader commercialization of AlloSure Kidney, KidneyCare, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, our products and patient and digital solutions or enhancements to those tests, products and patient and digital solutions; • acquire or license products or technologies including through acquisitions; and • finance our capital expenditures and general and administrative expenses.
Regardless of the impact of any or repeal, replacement or expansion of the Affordable Care Act on us, the government has shown significant interest in pursuing healthcare reform and reducing healthcare costs. Any government-adopted reform measures could decrease the amount of reimbursement available from governmental and other third-party payers.
Regardless of the impact of any repeal, replacement or expansion of the Affordable Care Act on us, the government has shown significant interest in pursuing healthcare reform and reducing healthcare costs. Any government-adopted reform measures could decrease the amount of reimbursement available from governmental and other third-party payers.
The decision to commence litigation over infringement of a patent is complex and may lead to several risks to us, including the following, among others: • the time, significant expense and distraction to management of managing such litigation; • the uncertainty of litigation and its potential outcomes; • the possibility that in the course of such litigation, the defendant may challenge the validity of our patents, which could result in a re-examination or post grant review of our patents and the possibility that the claims in our patents may be limited in scope or invalidated altogether; • the potential that the defendant may successfully persuade a court that their technology or products do not infringe our intellectual property rights; • the impact of such litigation on other licensing relationships we have or seek to establish, including the timing of renewing or entering into such relationships, as applicable, as well as the terms of such relationships; • the potential that a defendant may assert counterclaims against us; and • adverse publicity to us or harm to relationships we have with customers or others.
The decision to commence litigation over infringement of a patent is complex and may lead to several risks to us, including the following, among others: • the time, significant expense and distraction to management of managing such litigation; • the uncertainty of litigation and its potential outcomes; • the possibility that in the course of such litigation, the defendant may challenge the validity of our patents, which could result in a re-examination or post grant review of our patents and the possibility that the claims in our patents may be limited in scope or invalidated altogether; • the potential that the defendant may successfully persuade a court that its technology or products do not infringe our intellectual property rights; • the impact of such litigation on other licensing relationships we have or seek to establish, including the timing of renewing or entering into such relationships, as applicable, as well as the terms of such relationships; • the potential that a defendant may assert counterclaims against us; and • adverse publicity to us or harm to relationships we have with customers or others.
In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of life sciences stocks; • changes in operating performance and stock market valuations of other life sciences companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • entering into financing or other arrangements with rights or terms senior to the interests of common stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • public health emergencies; • our prior decision to withdraw our revenue guidance for fiscal 2023; • our decision to issue future financial guidance and the terms of such guidance; and • general economic conditions and slow or negative growth of our markets.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of life sciences stocks; • changes in operating performance and stock market valuations of other life sciences companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • entering into financing or other arrangements with rights or terms senior to the interests of common stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • public health emergencies; • our prior decision to withdraw our revenue guidance for fiscal 2023; • our decision to issue future financial guidance and the terms of such guidance; and • general economic conditions and slow or negative growth of our markets.
There can be no assurance that we will be able to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or our future solutions, if any, on a timely basis at a level consistent with demand, that our efforts to scale our commercial operations will not negatively affect the quality of test results or that we will be successful in responding to the growing complexity of our testing operations.
There can be no assurance that we will be able to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or our future solutions, if any, on a timely basis at a level consistent with demand, that our efforts to scale our commercial operations will not negatively affect the quality of test results or that we will be successful in responding to the growing complexity of our testing operations.
We expect to continue to incur significant operating expenses and anticipate that our expenses will increase due to costs relating to, among other things: • researching, developing, validating and commercializing potential new testing services, products and patient and digital solutions, including additional expenses in connection with our continuing development and commercialization of KidneyCare, HeartCare, AlloSeq, AiTraC and other future solutions; • developing, presenting and publishing additional clinical and economic utility data intended to increase payer coverage and clinician adoption of our current and future solutions; • expansion of our operating capabilities; 26 Table of Contents • maintenance, expansion and protection of our intellectual property portfolio and trade secrets; • the process of fully integrating acquired companies and operations and the associated potential disruptions to our business; • future clinical trials; • expansion of the size and geographic reach of our sales force and our marketing capabilities to commercialize our existing and future solutions; • employment of additional clinical, quality control, scientific, customer service, laboratory, billing and reimbursement and management personnel; • compliance with existing and changing laws, regulations and standards, including those relating to corporate governance and public disclosure and regulations implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market LLC; • ongoing litigation; • employment of operational, financial, accounting and information systems personnel, consistent with expanding our operations and our status as a public company; and • failure to achieve expected operating results may cause a future impairment of goodwill or other assets.
We expect to continue to incur significant operating expenses and anticipate that our expenses will increase due to costs relating to, among other things: • researching, developing, validating and commercializing potential new testing services, products and patient and digital solutions, including additional expenses in connection with our continuing development and commercialization of KidneyCare, HeartCare, AlloSeq, AiTraC and other future solutions; • developing, presenting and publishing additional clinical and economic utility data intended to increase payer coverage and clinician adoption of our current and future solutions; • expansion of our operating capabilities; • maintenance, expansion and protection of our intellectual property portfolio and trade secrets; • the process of fully integrating acquired companies and operations and the associated potential disruptions to our business; • future clinical trials; • expansion of the size and geographic reach of our sales force and our marketing capabilities to commercialize our existing and future solutions; • employment of additional clinical, quality control, scientific, customer service, laboratory, billing and reimbursement and management personnel; • compliance with existing and changing laws, regulations and standards, including those relating to corporate governance and public disclosure and regulations implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market LLC; • ongoing litigation; • employment of operational, financial, accounting and information systems personnel, consistent with expanding our operations and our status as a public company; and • failure to achieve expected operating results may cause a future impairment of goodwill or other assets.
Although there have been few advances in technology relating to organ rejection in transplant recipients, the market for medical diagnostic companies is marked by rapid and substantial technological development and innovations that could make AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart and our other products and patient and digital solutions, including those in development, outdated.
Although there have been few advances in technology relating to organ rejection in transplant recipients, the market for medical diagnostic companies is marked by rapid and substantial technological development and innovations that could make AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, and our other products and patient and digital solutions, including those in development, outdated.
Our amended and restated bylaws designate the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated bylaws designate the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Moreover, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-compete with employees and require employers to rescind existing non-competes, may be lead to increased uncertainty in hiring and competition for talent.
Moreover, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-compete with employees and require employers to rescind existing non-competes, may lead to increased uncertainty in hiring and competition for talent.
AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, and our other products and solutions, along with the manufacturing processes, packaging, labeling, distribution, import, export, and advertising and promotional activities for such products and solutions, are or will be subject to continual requirements of, and review by, CMS, state licensing agencies, the FDA and comparable regulatory authorities.
AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, and our other products and solutions, along with the manufacturing processes, packaging, labeling, distribution, import, export, and advertising and promotional activities for such products and solutions, are or will be subject to continual requirements of, and review by, CMS, state licensing agencies, the FDA and comparable regulatory authorities.
We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart or our future solutions, if any. New hires require training and take time before they achieve full productivity.
We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or our future solutions, if any. New hires require training and take time before they achieve full productivity.
We must continually innovate, expand and update our test offerings to address unmet needs in monitoring transplant-related conditions. AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, and our other products and patient and digital solutions, including those in development, could become obsolete unless we continually innovate, enhance and expand our product offerings to include new clinical applications.
We must continually innovate, expand and update our test offerings to address unmet needs in monitoring transplant-related conditions. AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, and our other products and patient and digital solutions, including those in development, could become obsolete unless we continually innovate, enhance and expand our product offerings to include new clinical applications.
Our research and development efforts will be hindered if we are not able to acquire or contract with third parties for access to additional tissue and blood samples. Our clinical development relies on our ability to secure access to tissue and blood samples, as well as recipient information, including biopsy results and clinical outcomes from the same patient.
Our research and development efforts will be hindered if we are not able to acquire or contract with third parties for access to tissue and blood samples. Our clinical development relies on our ability to secure access to tissue and blood samples, as well as recipient information, including biopsy results and clinical outcomes from the same patient.
Others may develop lower-priced, less complex tests that could be viewed by clinicians and payers as functionally equivalent to our AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart tests, which could force us to lower the current list price of our test and impact our operating margins and our ability to achieve profitability.
Others may develop lower-priced, less complex tests that could be viewed by clinicians and payers as functionally equivalent to our AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung tests, which could force us to lower the current list price of our test and impact our operating margins and our ability to achieve profitability.
We cannot be certain that we would be able to find another CLIA-certified facility willing or able to adopt AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart or future solutions or able to comply with the required quality and regulatory standards, or that this laboratory would be willing or able to perform the tests for us on commercially reasonable terms.
We cannot be certain that we would be able to find another CLIA-certified facility willing or able to adopt AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or future solutions or able to comply with the required quality and regulatory standards, or that this laboratory would be willing or able to perform the tests for us on commercially reasonable terms.
If our laboratory facility in the U.S. becomes inoperable, we will be unable to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, and future testing solutions, if any, and our business will be harmed. We perform all of our testing services for the U.S. in our laboratory located in Brisbane, California. We do not have redundant laboratory facilities.
If our laboratory facility in the U.S. becomes inoperable, we will be unable to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung and future testing solutions, if any, and our business will be harmed. We perform all of our testing services for the U.S. in our laboratory located in Brisbane, California. We do not have redundant laboratory facilities.
Relying on partners for our sales and marketing subjects us to various risks, including: • our partners may fail to commit the necessary resources to develop a market for our products, may spend the majority of their time selling products unrelated to ours, or may be unsuccessful in marketing our products for other reasons; • under certain agreements, our partners’ obligations, including their required level of promotional activities, may be conditioned upon our ability to achieve or maintain a specified level of reimbursement coverage; • agreements with our partners may terminate prematurely due to disagreements or may result in disputes or litigation with our partners; • we may not be able to renew existing partner agreements, or enter into new agreements, on acceptable terms; • our existing relationships with partners may preclude us from entering into additional future arrangements; • our partners may violate local laws or regulations, potentially causing reputational or monetary damage to our business; • our partners may engage in sales practices that are locally acceptable but do not comply with standards required under U.S. laws that apply to us; and • our partners may be negatively affected by the financial instability of, and austerity measures implemented by, the countries in which they operate.
Relying on partners for our sales and marketing subjects us to various risks, including: 31 Table of Contents • our partners may fail to commit the necessary resources to develop a market for our products, may spend the majority of their time selling products unrelated to ours, or may be unsuccessful in marketing our products for other reasons; • under certain agreements, our partners’ obligations, including their required level of promotional activities, may be conditioned upon our ability to achieve or maintain a specified level of reimbursement coverage; • agreements with our partners may terminate prematurely due to disagreements or may result in disputes or litigation with our partners; • we may not be able to renew existing partner agreements, or enter into new agreements, on acceptable terms; • our existing relationships with partners may preclude us from entering into additional future arrangements; • our partners may violate local laws or regulations, potentially causing reputational or monetary damage to our business; • our partners may engage in sales practices that are locally acceptable but do not comply with standards required under U.S. laws that apply to us; and • our partners may be negatively affected by the financial instability of, and austerity measures implemented by, the countries in which they operate.
Due to the historically limited monitoring options and the well-established coverage and reimbursement for biopsies, clinicians are accustomed to monitoring for acute rejection in kidney and heart transplant recipients by utilizing biopsies. Many clinicians use AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart in parallel with biopsies rather than as an alternative to biopsies.
Due to the historically limited monitoring options and the well-established coverage and reimbursement for biopsies, clinicians are accustomed to monitoring for acute rejection in kidney and heart transplant recipients by utilizing biopsies. Many clinicians use AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung in parallel with biopsies rather than as an alternative to biopsies.
We are required to comply with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, including expanded disclosures and accelerated reporting requirements and more complex accounting rules. Compliance with Section 404 of the Sarbanes-Oxley Act, or Section 404, and other requirements will increase our costs and require additional management resources.
We are required to comply with the Sarbanes-Oxley Act and the related rules and regulations of the SEC, including expanded disclosures and accelerated reporting requirements and more complex accounting rules. Compliance with Section 404 of the Sarbanes-Oxley Act, or Section 404, and other requirements will increase our costs and require additional management resources.
Our business will suffer if these service providers do not support AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart or the other solutions that we may develop. For example, these laboratories may determine that processing the samples for our solutions requires too much additional effort.
Our business will suffer if these service providers do not support AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or the other solutions that we may develop. For example, these laboratories may determine that processing the samples for our solutions requires too much additional effort.
Our business or financial results may be adversely impacted by these uncertain economic conditions, including: adverse changes in interest rates, foreign currency exchange rates, tax laws or tax rates; increased inflation globally and in the U.S. in particular; liquidity concerns at financial institutions; a potential economic recession; contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all; and the effects of government initiatives to manage economic conditions.
Our business or financial results may be adversely impacted by these uncertain economic conditions, including: adverse changes in interest rates, foreign currency exchange rates, tax laws or tax rates; prolonged periods of increased inflation globally and in the U.S. in particular; liquidity concerns at financial institutions; a potential economic recession; contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all; and the effects of government initiatives to manage economic conditions.
We cannot predict whether Noridian or any future MAC will continue to provide reimbursement for AlloMap Heart, AlloSure Kidney, AlloSure Heart or AlloSure Lung at the same payment amount or with the same breadth of coverage in the future, if at all.
We cannot predict whether Noridian or any future MAC will continue to provide reimbursement for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, or AlloSure Lung at the same payment amount or with the same breadth of coverage in the future, if at all.
Additional changes in the MAC processing Medicare claims for AlloSure Kidney, AlloMap Heart, AlloSure Heart or AlloSure Lung could impact the coverage or payment amount for our tests and our ability to obtain Medicare coverage for any products we may launch in the future.
Additional changes in the MAC processing Medicare claims for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare or AlloSure Lung could impact the coverage or payment amount for our tests and our ability to obtain Medicare coverage for any products we may launch in the future.
Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.
Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together 24 Table of Contents with other information in this Annual Report on Form 10-K, or this Form 10-K, and our other filings with the SEC before making an investment decision regarding our common stock. • We have a history of losses, and we expect to incur net losses for the next several years. • We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance. • Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business. • We are and could become subject to legal proceedings that could be time-consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations. • The development and commercialization of additional diagnostic solutions are key to our growth strategy.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K, or this Form 10-K, and our other filings with the SEC before making an investment decision regarding our common stock. • We have a history of losses, and we expect to incur net losses for the next several years. • We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance. • Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business. • We are and could become subject to legal proceedings that could be time-consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations. • The development and commercialization of additional diagnostic solutions are key to our growth strategy.
It is critical to the success of our sales efforts that we educate a sufficient number of clinicians and administrators about AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart and our future solutions, and demonstrate the clinical benefits of these solutions.
It is critical to the success of our sales efforts that we educate a sufficient number of clinicians and administrators about AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung and our future solutions, and demonstrate the clinical benefits of these solutions.
The value of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart depends, in large part, on our ability to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart tests on a timely basis and at a high quality standard, and on our reputation for such timeliness and quality.
The value of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung depends, in large part, on our ability to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung tests on a timely basis and at a high quality standard, and on our reputation for such timeliness and quality.
We could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions following validation and other required procedures.
We could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or future solutions following validation and other required procedures.
Transplant centers may not adopt AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or our other solutions due to historical practices or due to more favorable reimbursement policies associated with other means of monitoring transplants.
Transplant centers may not adopt AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung or our other solutions due to historical practices or due to more favorable reimbursement policies associated with other means of monitoring transplants.
Federal budgetary limitations and changes in healthcare policy, such as the creation of broad limits for diagnostic products or requirements that Medicare patients pay for portions of clinical laboratory tests or services received, could substantially diminish the sale, or inhibit the utilization, of AlloSure Kidney, AlloMap Heart, AlloSure Heart and our future diagnostic solutions, increase costs, divert management’s attention and adversely affect our ability to generate revenue and achieve profitability.
Federal budgetary limitations and changes in healthcare policy, such as the creation of broad limits for diagnostic products or requirements that Medicare patients pay for portions of clinical laboratory tests or services received, could substantially diminish the sale, or inhibit the utilization, of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung and our future diagnostic solutions, increase costs, divert management’s attention and adversely affect our ability to generate revenue and achieve profitability.
We therefore cannot be certain that others have not filed patent applications that cover inventions that are the subject of pending applications that we own or exclusively license or that we or our licensors, first to file.
We therefore cannot be certain that others have not filed patent applications that cover inventions that are the subject of pending applications that we own or exclusively license or that we or our licensors were first to file.
If we should encounter delays or difficulties in securing from Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., including as a result of impacts on their respective businesses due to the ongoing conflict between Ukraine and Russia, the global impact of 41 Table of Contents restrictions and sanctions imposed on Russia, and the Israel-Hamas war, the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.
If we should encounter delays or difficulties in securing from Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., including as a result of impacts on their respective businesses due to the ongoing conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia, and the Israel-Hamas war, the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.
If we are unable to compete successfully against current or future competitors, we may be unable to increase market acceptance for and sales of AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart and our products and patient and digital solutions, which could prevent us from increasing or sustaining our revenues or achieving profitability and could cause the market price of our common stock to decline.
If we are unable to compete successfully against current or future competitors, we may be unable to increase market acceptance for and sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung tests, and our products and patient and digital solutions, which could prevent us from increasing or sustaining our revenues or achieving profitability and could cause the market price of our common stock to decline.
We have previously announced restructuring plans intended to optimize costs and simplify our organizational and corporate structure, and we most recently implemented such plans in January, May and December 2023. Any additional restructuring efforts may, divert management’s attention, increase expenses on a short-term basis and lead to potential issues with employees, customers or suppliers.
We have previously announced restructuring plans intended to optimize costs and simplify our organizational and corporate structure, and we most recently implemented such plans in January, May and December 2023, and November and December 2024. Any additional restructuring efforts may divert management’s attention, increase expenses on a short-term basis and lead to potential issues with employees, customers or suppliers.
These billing complexities, and the resulting uncertainty in obtaining payment for AlloSure Kidney, AlloMap Heart, AlloSure Heart and future solutions, as well as the results of Noridian’s referral to CMS and any audits or inquiries evaluating our services create a risk of further regulatory or enforcement action from these or other regulatory agencies, or that our claims are denied or that any historical reimbursement of such claims is subject to forfeiture and could negatively affect our revenue, cash flows and profitability. 46 Table of Contents Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart.
These billing complexities, and the resulting uncertainty in obtaining payment for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung and future solutions, as well as the results of Noridian’s referral to CMS and any audits or inquiries evaluating our services create a risk of further regulatory or enforcement action from these or other regulatory agencies, or that our claims are denied or that any historical reimbursement of such claims is subject to forfeiture and could negatively affect our revenue, cash flows and profitability. 36 Table of Contents Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung.
Congress decide to regulate LDTs and other future solutions under development as medical devices, we could be required to conduct additional premarket analytical studies and clinical testing subsequent to continued commercialization in the case of AlloSure LDTs and/or conduct premarket clinical and analytical testing prior to submitting a regulatory application for commercial sales for future products not yet developed.
Congress decides to regulate LDTs and other future solutions under development as medical devices, we could be required to conduct additional premarket analytical studies and clinical testing subsequent to continued commercialization in the case of AlloSure LDTs and/or conduct premarket clinical and analytical testing prior to submitting a regulatory application for commercial sales for future products not yet developed.
While in general it is difficult to predict specifically what effects the Affordable Care Act or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. 47 Table of Contents In December 2020, the U.S.
While in general it is difficult to predict specifically what effects the Affordable Care Act or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. 37 Table of Contents In December 2020, the U.S.
Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill our payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our current and future products and solutions and other patient and clinician education and outreach efforts through our website, and manage the administrative aspects of our business, any of which could damage our reputation and adversely affect our business.
Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test 45 Table of Contents results, bill our payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our current and future products and solutions and other patient and clinician education and outreach efforts through our website, and manage the administrative aspects of our business, any of which could damage our reputation and adversely affect our business.
We believe that our future revenue will depend on, among other factors: • the continued usage and acceptance of our current and future solutions; • demand for our testing services, products and patient and digital solutions; • the introduction and acceptance of new or enhanced products or services by us or by competitors; • our ability to maintain reimbursement for AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart and secure reimbursement for our future solutions; • our decision to continue our Medicare reimbursement submissions for AlloSure Kidney; • our decision to issue future financial guidance and the terms of such guidance; • our ability to anticipate and effectively adapt to developing markets and to rapidly changing technologies; • our ability to attract, retain and motivate qualified personnel; • the initiation, renewal or expiration of significant contracts with our commercial partners; • pricing changes by us, our suppliers or our competitors; and • general economic conditions and other factors.
We believe that our future revenue will depend on, among other factors: • the continued usage and acceptance of our current and future solutions; • demand for our testing services, products and patient and digital solutions; • the introduction and acceptance of new or enhanced products or services by us or by competitors; • our ability to maintain reimbursement for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung and secure reimbursement for our future solutions; 27 Table of Contents • our decision to continue our Medicare reimbursement submissions for AlloSure Kidney; • our decision to issue future financial guidance and the terms of such guidance; • our ability to anticipate and effectively adapt to developing markets and to rapidly changing technologies; • our ability to attract, retain and motivate qualified personnel; • the initiation, renewal or expiration of significant contracts with our commercial partners; • pricing changes by us, our suppliers or our competitors; and • general economic conditions and other factors.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum f or the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended .
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum f or the resolution of any complaint asserting a cause of action arising under the Securities Act .
If we are unable to demonstrate the effectiveness of AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, our other products and patient and digital solutions and future diagnostic solutions and tests, if any, compared to new methodologies and technologies, then sales of our tests, products and patient and digital solutions could decline, which would harm our business and financial results.
If we are unable to demonstrate the effectiveness of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, or our other products and patient and digital solutions and future diagnostic solutions and tests, if any, compared to new methodologies and technologies, then sales of our tests, products and patient and digital solutions could decline, which would harm our business and financial results.
However, the material weaknesses will not be fully remediated until management can demonstrate the full effectiveness of controls over a sufficient period of time, and we can give no assurance on the success of such measures or the outcome of our assessment of these measures at this time.
However, the material weakness will not be fully remediated until management can demonstrate the full effectiveness of controls over a sufficient period of time, and we can give no assurance on the success of such measures or the outcome of our assessment of these measures at this time.
If we were to lose our CLIA accreditation or California license, whether as a result of a revocation, suspension or limitation, we would no longer be able to perform AlloMap Heart, AlloSure Kidney or AlloSure Heart, which would limit our revenues and materially harm our business.
If we were to lose our CLIA accreditation or California license, whether as a result of a revocation, suspension or limitation, we would no longer be able to perform AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, or AlloSure Lung which would limit our revenues and materially harm our business.
We do not believe that the CID, the prior SEC subpoena, or the state regulatory agency information request raise or raised any issues regarding the safety or clinical utility of any of our products or services and are cooperating fully with the investigations and the request for information.
We do not believe that the CID, the prior SEC subpoena, or the state regulatory agency information request raises or raised any issues regarding the safety or clinical utility of any of our products or services and are cooperating fully with the investigations and the request for information.
Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur 60 Table of Contents additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or operating results.
Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or operating results.
Retroactive adjustments may change amounts realized from third-party payers. We are also subject to claims reviews and/or audits by such payers, including governmental audits of our Medicare claims, and have in the past been required to repay these payers in certain circumstances where a preliminary finding was made that we were incorrectly reimbursed.
Retroactive adjustments may change amounts 22 Table of Contents realized from third-party payers. We are also subject to claims reviews and/or audits by such payers, including governmental audits of our Medicare claims, and have in the past been required to repay these payers in certain circumstances where a preliminary finding was made that we were incorrectly reimbursed.
If we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting or otherwise fail to maintain or implement effective controls and procedures for financial reporting, we could be unable to accurately and timely report our financial position, results of operations, and cash flows or key operating metrics, which could result in late filings of our annual and quarterly reports under the Securities Exchange Act of 1934, as amended, 61 Table of Contents restatements of our consolidated financial statements or other corrective disclosures, a decline in our stock price, suspension or delisting of our common stock from the Nasdaq Global Market, SEC investigations, civil or criminal sanctions, an inability to access the capital and commercial lending markets, defaults under our debt and other agreements or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
If we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting or otherwise fail to maintain or implement effective controls and procedures for financial reporting, we could be unable to accurately and timely report our financial position, results of operations, and cash flows or key operating metrics, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures, a decline in our stock price, suspension or delisting of our common stock from the Nasdaq Global Market, SEC investigations, civil or criminal sanctions, an inability to access the capital and commercial lending markets, defaults under our debt and other agreements or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
It is possible that an adverse result in one or more of these possible future events could have a material adverse effect on us, including increased expenses to defend, settle or resolve such litigation. 31 Table of Contents The development and commercialization of additional diagnostic solutions are key to our growth strategy.
It is possible that an adverse result in one or more of these possible future events could have a material adverse effect on us, including increased expenses to defend, settle or resolve such litigation. The development and commercialization of additional diagnostic solutions are key to our growth strategy.
Investors, particularly institutional investors, use these ratings to benchmark companies against their peers and if we are perceived as lagging with respect to ESG initiatives, these investors may engage with us to improve ESG disclosures or performance and may also make voting decisions, or take other actions, to hold us and our board of directors accountable.
Investors, particularly institutional investors, use these ratings to benchmark companies against their peers and if we are perceived as lagging with respect to ESG initiatives, these investors may engage with us to improve ESG disclosures or performance and may also make voting decisions, or take other actions, to hold 28 Table of Contents us and our Board of Directors accountable.
Additional capital, if needed, may not be available on satisfactory terms, or at all, and might include the issuance of equity securities, debt, cash from collaboration agreements or a combination of these. Furthermore, if we raise additional funds by issuing equity securities, dilution to our existing stockholders could result.
Additional capital, if needed, may not be available on satisfactory terms, or at all, and might include the issuance of equity securities, debt, cash from collaboration agreements or a combination of these. Furthermore, if we raise additional funds by 29 Table of Contents issuing equity securities, dilution to our existing stockholders could result.
Health insurers and other third-party payers may decide to revoke coverage of our existing test, decide not to cover our future solutions or may provide inadequate reimbursement, which could jeopardize our commercial prospects.
Health insurers and other third-party payers may decide to revoke coverage of our existing tests, decide not to cover our future solutions or may provide inadequate reimbursement, which could jeopardize our commercial prospects.
We cannot predict whether Medicare reimbursements will continue at the same payment amount or with the same breadth of coverage in the future, if at all. The Protecting Access to Medicare Act of 2014, or PAMA, included a substantial new payment system for clinical laboratory tests under the Clinical Laboratory Fee Schedule, or CLFS.
We cannot predict whether Medicare reimbursements will continue at the same payment amount or with the same breadth of coverage in the future, if at all. 21 Table of Contents The Protecting Access to Medicare Act of 2014, or PAMA, included a substantial new payment system for clinical laboratory tests under the Clinical Laboratory Fee Schedule, or CLFS.
We would also be required to secure and maintain state licenses required 37 Table of Contents by several states, including California, Florida, Maryland, New York, Rhode Island and Pennsylvania, which can take a significant amount of time and result in delays in our ability to begin operations at that facility.
We would also be required to secure and maintain state licenses required by several states, including California, Florida, Maryland, New York, Rhode Island and Pennsylvania, which can take a significant amount of time and result in delays in our ability to begin operations at that facility.
These stockholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, they could dictate the management of our business and affairs.
These stockholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation 47 Table of Contents or sale of all or substantially all of our assets. In addition, they could dictate the management of our business and affairs.
To compete successfully, we must continually update our product range and produce continually updated test kits and software. The failure to maintain the quality of our products or inability to keep pace with this 35 Table of Contents innovation could render our existing or future solutions obsolete or less attractive to lab directors and clinicians.
To compete successfully, we must continually update our product range and produce continually updated test kits and software. The failure to maintain the quality of our products or inability to keep pace with this innovation could render our existing or future solutions obsolete or less attractive to lab directors and clinicians.
As it is in the short seller’s best interests for the price of the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short.
As it is in the short seller’s best interests for the price of 51 Table of Contents the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short.
If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed. 53 Table of Contents If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed. If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
In addition, an application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results. • International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. • Our operating results may be adversely affected by unfavorable economic and market conditions. • Billing complexities associated with obtaining payment or reimbursement for our current and future solutions may negatively affect our revenue, cash flows and profitability. • Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart. • To operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory-developed tests, including FDA regulations. • We are subject to numerous fraud and abuse and other laws and regulations pertaining to our business, the violation of any one of which could harm our business. • Our competitive position depends on maintaining intellectual property protection. • Our business is dependent on licenses from third parties. • Our operating results may fluctuate, which could cause our stock price to decrease. • The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.
In addition, an application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results. • International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. • Our operating results may be adversely affected by unfavorable economic and market conditions. • Billing complexities associated with obtaining payment or reimbursement for our current and future solutions may negatively affect our revenue, cash flows and profitability. • Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung. • To operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory-developed tests, including FDA regulations. • We are subject to numerous fraud and abuse and other laws and regulations pertaining to our business, the violation of any one of which could harm our business. • Our competitive position depends on maintaining intellectual property protection. • Our business is dependent on licenses from third parties. • Our operating results may fluctuate, which could cause our stock price to decrease. • The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment. 20 Table of Contents Risk Factors Investing in our common stock involves a high degree of risk.
Our rights to use these and other licensed technologies, data and materials and to employ the inventions claimed in licensed patents are subject to the continuation of and our compliance with the terms of the applicable licenses. Termination of the license could prevent us from producing or selling some or all of our products.
Our rights to use these and other licensed technologies, data and materials and to employ the inventions claimed in licensed patents are subject to the continuation of and our compliance with the terms of the applicable licenses. 44 Table of Contents Termination of the license could prevent us from producing or selling some or all of our products.
There is also a risk that future acquisitions will result in the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the write-off of goodwill and other intangible assets, any of which could harm our business 40 Table of Contents and results of operations.
There is also a risk that future acquisitions will result in the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the write-off of goodwill and other intangible assets, any of which could harm our business and results of operations.
If the steps we take to remediate the material weaknesses are ineffective, these material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filings of our required periodic reports.
If the steps we take to remediate the material weakness are ineffective, the material weakness could result in material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filings of our required periodic reports.
We do not currently maintain “key person” insurance on any of our employees. 39 Table of Contents Our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians, including geneticists, biostatisticians, engineers, licensed laboratory technicians and chemists.
We do not currently maintain “key person” insurance on any of our employees. Our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians, including geneticists, biostatisticians, engineers, licensed laboratory technicians and chemists.
While we do not market AlloSure Kidney, AlloSure Lung, AlloMap Heart or AlloSure Heart as biopsy alternatives, 34 Table of Contents per se, if treatment center administrators view our test as an alternative to a biopsy but believe they would derive more revenue from the performance of biopsies, such administrators may be motivated to reduce or avoid the use of our test.
While we do not market AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare or AlloSure Lung as biopsy alternatives, per se, if treatment center administrators view our test as an alternative to a biopsy but believe they would derive more revenue from the performance of biopsies, such administrators may be motivated to reduce or avoid the use of our test.
We have insurance coverage 55 Table of Contents in place for certain potential liabilities and costs relating to service interruptions, data corruption, cybersecurity risks, data security incidents and/or network security breaches, but this insurance is limited in amount, subject to a deductible, and may not be adequate to cover us for all costs arising from these incidents.
We have insurance coverage in place for certain potential liabilities and costs relating to service interruptions, data corruption, cybersecurity risks, data security incidents and/or network security breaches, but this insurance is limited in amount, subject to a deductible, and may not be adequate to cover us for all costs arising from these incidents.
Changes to, or interpretations of, accounting methods or 44 Table of Contents policies may require us to reclassify, restate or otherwise change or revise our consolidated financial statements, including those contained in this Annual Report on Form 10-K.
Changes to, or interpretations of, accounting methods or policies may require us to reclassify, restate or otherwise change or revise our consolidated financial statements, including those contained in this Annual Report on Form 10-K.
In addition, national stock exchanges, and in particular the market for life science companies, have experienced significant price and volume fluctuations that have often 56 Table of Contents been unrelated or disproportionate to the operating performance of those companies.
In addition, national stock exchanges, and in particular the market for life science companies, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
To attract new laboratory customers, the performance of our products must provide a performance or cost advantages over similar products sold by our competitors. If clinicians, hospital administrators and laboratories do not adopt and continue to use our tests and products or our future solutions and tests, our business and financial results will suffer.
To attract new laboratory customers, the performance of our products must provide performance or cost advantages over similar products sold by our competitors. 24 Table of Contents If clinicians, hospital administrators and laboratories do not adopt or continue to use our tests and products or our future solutions and tests, our business and financial results will suffer.
In addition to the CLIA regulation, other federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • federal and state laws and regulations regarding billing and claims payment applicable to clinical laboratories and/or regulatory agencies enforcing those laws and regulations; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented to the government, claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent, or making a false statement material to a false or fraudulent claim; • the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services, including clinical laboratory services, reimbursed by Medicare if the physician (or a member of the physician’s family); • has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • state laws regarding prohibitions on fee-splitting; • the federal healthcare program exclusion statute; and • state and foreign law equivalents of each of the above federal laws and regulations, such as anti-kickback, false claims, and self-referral laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
In addition to the CLIA regulation, other federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • federal and state laws and regulations regarding billing and claims payment applicable to clinical laboratories and/or regulatory agencies enforcing those laws and regulations; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented to the government, claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent, or making a false statement material to a false or fraudulent claim; • the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services, including clinical laboratory services, reimbursed by Medicare if the physician (or a member of the physician’s family); • has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • state laws regarding prohibitions on fee-splitting; • the federal healthcare program exclusion statute; and • state and foreign law equivalents of each of the above federal laws and regulations, such as anti-kickback, false claims, and self-referral laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. 40 Table of Contents Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
We were inspected as part of the customary College of American Pathologists audit and recertified in March 2022 as a result of passing that inspection. We expect the next regular inspection under the CLIA to occur in 2024.
We were inspected as part of the customary College of American Pathologists audit and recertified in 2024 as a result of passing that inspection. We expect the next regular inspection under the CLIA to occur in 2026.
Failure to implement necessary procedures, transition to new 36 Table of Contents equipment or processes or hire new personnel could result in higher costs of processing or an inability to meet market demand in a timely manner.
Failure to implement necessary procedures, transition to new equipment or processes or hire new personnel could result in higher costs of processing or an inability to meet market demand in a timely manner.
In addition, our exclusive license agreement with Stanford that previously covered certain patents related to diagnostic and predictive technologies terminated in October 51 Table of Contents 2023. Third parties may independently develop similar or competing technology that avoids the patents we own or exclusively license.
In addition, our exclusive license agreement with Stanford that previously covered certain patents related to diagnostic and predictive technologies terminated in October 2023. Third parties may independently develop similar or competing technology that avoids the patents we own or exclusively license.
For example, the California Consumer Privacy Act, or the CCPA, took effect on January 1, 2020 and requires, among other things, covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and will give such consumers the right to opt-out of certain sales of personal information.
For example, the CCPA took effect on January 1, 2020 and requires, among other things, covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and will give such consumers the right to opt-out of certain sales of personal information.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and The Nasdaq Stock Market LLC, may increase legal and financial compliance costs and make some activities more time-consuming.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and The Nasdaq Stock Market LLC, may increase legal and financial compliance costs and make 50 Table of Contents some activities more time-consuming.
This provision does not apply to claims brought pursuant to the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, or any other claim for which the U.S. federal courts have exclusive jurisdiction.
This provision does not apply to claims brought pursuant to the Securities Exchange Act, or the rules and regulations promulgated thereunder, or any other claim for which the U.S. federal courts have exclusive jurisdiction.
Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests), private payer payment rates and volumes for their tests.
PAMA includes a substantial new payment system for clinical laboratory tests under the CLFS. Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests), private payer payment rates and volumes for their tests.
For the year ended December 31, 2023, revenue from Medicare for AlloMap Heart, AlloSure Kidney and AlloSure Heart represented 53% of testing services revenue. However, we may not be able to maintain or increase our tests reimbursed by Medicare for a variety of reasons, including changes in reimbursement practices, general policy shifts, or reductions in reimbursement amounts.
For the year ended December 31, 2024, revenue from Medicare for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung represented 50% of testing services revenue. However, we may not be able to maintain or increase our tests reimbursed by Medicare for a variety of reasons, including changes in reimbursement practices, general policy shifts, or reductions in reimbursement amounts.
If we are unable to increase sales of our testing services or products or successfully develop and commercialize other solutions, tests or enhancements, or if we do not continue our Medicare reimbursement submissions for AlloSure Kidney at the same levels in place prior to the Billing Articles, our revenues and ability to achieve profitability would be impaired, and the market price of our common stock could decline.
If we are unable to increase sales of our testing services or products or successfully develop and commercialize other solutions, tests or enhancements, or if we do not continue our Medicare reimbursement submissions for AlloSure Kidney at the same levels in place prior to the Billing Articles issued by Palmetto MolDX in 2023 (the “Billing Articles”), our revenues and ability to achieve profitability would be impaired, and the market price of our common stock could decline.
In addition, conducting international operations subjects us to risks that, generally, we have not faced in the U.S., including: • uncertain or changing regulatory registration and approval processes; • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our current and future solutions in various countries; • competition from companies located in the countries in which we offer our products that may put us at a competitive disadvantage; • financial risks, such as longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • logistics and regulations associated with shipping recipient samples, including infrastructure conditions and transportation delays; • limits in our ability to penetrate international markets if we are not able to process solutions locally; • difficulties in managing and staffing international operations and assuring compliance with foreign corrupt practices laws; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens and complexities; • multiple, conflicting and changing laws and regulations such as healthcare regulatory requirements and other governmental approvals, permits and licenses; 42 Table of Contents • the imposition of trade barriers such as tariffs, quotas, trade wars, preferential bidding or import or export licensing requirements; • political and economic instability, including interruptions in international relations, wars, terrorism and political unrest, general security concerns, outbreak of disease, boycotts, curtailment of trade and other business restrictions, including the ongoing conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia and the Israel-Hamas war; • fluctuations in currency exchange rates; • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, its books and records provisions or its anti-bribery provisions, as well as risks associated with other anti-bribery and anti-corruption laws; and • reduced or varied protection for intellectual property rights in some countries.
In addition, conducting international operations subjects us to risks that, generally, we have not faced in the U.S., including: • uncertain or changing regulatory registration and approval processes; • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our current and future solutions in various countries; • competition from companies located in the countries in which we offer our products that may put us at a competitive disadvantage; • financial risks, such as longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • risks related to our operations in Russia and Iran, including restrictions on our access to banking services, changes in the U.S., EU or other sanctions laws that limit financial transactions or increase or compliance burden and potential legal exposure and counterparty risk; • logistics and regulations associated with shipping recipient samples, including infrastructure conditions and transportation delays; • limits in our ability to penetrate international markets if we are not able to process solutions locally; • difficulties in managing and staffing international operations and assuring compliance with foreign corrupt practices laws; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens and complexities; • multiple, conflicting and changing laws and regulations such as healthcare regulatory requirements and other governmental approvals, permits and licenses; • the imposition of trade barriers such as tariffs, quotas, trade wars, preferential bidding or import or export licensing requirements; • political and economic instability, including interruptions in international relations, wars, terrorism and political unrest, general security concerns, outbreak of disease, boycotts, curtailment of trade and other business restrictions, including the ongoing conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia and the Israel-Hamas war; • fluctuations in currency exchange rates; • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, its books and records provisions or its anti-bribery provisions, as well as risks associated with other anti-bribery and anti-corruption laws; and • reduced or varied protection for intellectual property rights in some countries. 32 Table of Contents The occurrence of any one of the above could harm our business and, consequently, our revenues and results of operations.
Our expanding international operations could be affected by changes in laws, trade regulations, labor and employment regulations, and procedures and actions affecting approval, production, pricing, reimbursement and marketing of our current and future products and solutions, as well as by inter-governmental disputes. Any of these changes could adversely affect our business.
Our expanding international operations could be affected by changes in laws, trade regulations, labor and employment regulations, and procedures and actions affecting approval, production, pricing, reimbursement and marketing of our current and future products and solutions, as well as by inter-governmental disputes.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition or results of operations, including the sustainability of our business over time. In addition, the SEC has announced proposed rules that, among other matters, will establish a framework for reporting of climate-related risks.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition or results of operations, including the sustainability of our business over time. In addition, in March 2024, the SEC adopted rules that, among other matters, establish a framework for reporting of climate-related risks.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The Board and the Audit Committee each receive regular presentations and reports on developments in the cybersecurity space, including risk management practices, recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security issues encountered by our peers and third parties.
The Board and the Audit and Finance Committee each receive regular presentations and reports on developments in the cybersecurity space, including risk management practices, recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security issues encountered by our peers and third parties.
The results of such assessments, audits, and reviews are evaluated by management and reported to the Audit Committee of the Board, or the Audit Committee, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews.
The results of such assessments, audits, and reviews are evaluated by management and reported to the Audit and Finance Committee of the Board, or the Audit and Finance Committee, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews.
Material Affects of Cybersecurity Incidents Except as described in the section entitled “Risk Factors” included in Part I, Item 1A, including, without limitation, the risk factor above titled “ We face four primary risks relative to protecting critical information: loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of our being unable to identify and audit our controls over the first three risks.
Material Effects of Cybersecurity Incidents Except as described in the section entitled “Risk Factors” included in Part I, Item 1A, including, without limitation, the risk factor above titled “ We face four primary risks relative to protecting critical information: loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of our being unable to identify and audit our controls over the first three risks.
Governance The Board, in coordination with the Audit Committee, oversees our risk management program, including the management of cybersecurity threats.
Governance The Board, in coordination with the Audit and Finance Committee, oversees our risk management program, including the management of cybersecurity threats.
Our CEO, Chief Financial Officer, and General Counsel each hold undergraduate and graduate degrees in their respective fields. Collectively, they have several decades of experience managing risk at our company and in similar organizations or settings and assessing cybersecurity threats.
The CTO holds undergraduate and graduate degrees in Management Information Systems and Masters in Business Administration. Our Chief Executive Officer, Chief Financial Officer, and General Counsel each hold undergraduate and graduate degrees in their respective fields. Collectively, they have several decades of experience managing risk at our company and in similar organizations or settings and assessing cybersecurity threats.
The CISO/CIO, in coordination with senior management including the Office of the Chief Executive Officer, or the CEO, Chief Financial Officer, and General Counsel, works collaboratively across our company to implement a program designed to protect 63 Table of Contents our information systems from cybersecurity threats and to promptly respond to any material cybersecurity incidents in accordance with our incident response and recovery plans.
Annually, the Board and the Audit and Finance Committee discuss our approach to overseeing cybersecurity threats with our Chief Technology Officer, or CTO, and other senior management members. 53 Table of Contents The CTO, in coordination with senior management including the Chief Executive Officer, Chief Financial Officer, and General Counsel, works collaboratively across our company to implement a program designed to protect our information systems from cybersecurity threats and to promptly respond to any material cybersecurity incidents in accordance with our incident response and recovery plans.
Through ongoing communications with these teams, the CISO/CIO and senior management are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents, and report such threats and incidents to the Audit Committee when appropriate.
Through ongoing communications with these teams, the CTO and senior management are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents, and report such threats and incidents to the Audit and Finance Committee when appropriate. The CTO has served in various roles in information technology and information security for over 25 years.
The Board and the Audit Committee also receive prompt and timely information regarding any cybersecurity risk that meets pre-established reporting thresholds. Annually, the Board and the Audit Committee discuss our approach to overseeing cybersecurity threats with our Chief Information Security Officer/Chief Information Officer, or CISO/CIO, and other senior management members.
The Board and the Audit and Finance Committee also receive prompt and timely information regarding any cybersecurity risk that meets pre-established reporting thresholds.
Removed
The CISO/CIO has served in various roles in information technology and information security for over 20 years, including serving as the Chief Information Security Officer of another public company for over 6 years. The CISO/CIO holds undergraduate and graduate degrees in computer science and has attained the professional certification of Certified Chief Information Security Officer.

Item 2. Properties

Properties — owned and leased real estate

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The following is a summary of the locations, functions and approximate square footage of those facilities as of December 31, 2023: Location Function Square Footage United States Brisbane, California Corporate headquarters 26,506 Brisbane, California Research & development and clinical laboratories 68,318 West Chester, Pennsylvania Sales office and distribution 6,336 Omaha, Nebraska Digital solutions office 24,984 Columbus, Ohio Digital solutions office 3,806 Flowood, Mississippi Transplant pharmacy 4,800 Gaithersburg, Maryland General office use 2,118 Europe Stockholm, Sweden Research & development and product manufacturing 24,940 Australia Fremantle Research & development and product manufacturing 11,593 We do not own any real property.
The following is a summary of the locations, functions and approximate square footage of those facilities as of December 31, 2024: Location Function Square Footage United States Brisbane, California Corporate headquarters 26,506 Brisbane, California Research & development and clinical laboratories 61,444 West Chester, Pennsylvania Sales office and distribution 6,336 Omaha, Nebraska Digital solutions office 24,984 Columbus, Ohio Digital solutions office 3,806 Flowood, Mississippi Transplant pharmacy 4,800 Europe Stockholm, Sweden Research & development and product manufacturing 24,940 Australia Fremantle Research & development 5,199 We do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS The information set forth in Note 9, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K under the caption “Litigation and Indemnification Obligations” is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 64 Table of Contents PART II
ITEM 3. LEGAL PROCEEDINGS The information set forth in Note 9, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K under the caption “Litigation and Indemnification Obligations” is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 54 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Item 4. Mine Safety Disclosures 64 PART II 65 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 65 Item 6. [Reserved] 66 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 67 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8.
Item 4. Mine Safety Disclosures 54 PART II 55 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 55 Item 6. [Reserved] 56 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 57 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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(4) On December 3, 2022, our board of directors approved our stock repurchase program, authorizing us to purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on December 8, 2022.
(2) On December 3, 2022, our Board of Directors approved our stock repurchase program, authorizing us to purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on December 8, 2022.
The following stock performance graph compares total stockholder returns for CareDx, Inc. from December 31, 2018 through December 29, 2023 against the Nasdaq Market Composite Index and Nasdaq Biotech Index, assuming a $100 investment made on December 31, 2018. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
The following stock performance graph compares total stockholder returns for CareDx, Inc. from December 31, 2019 through December 31, 2024 against the Nasdaq Market Composite Index and Nasdaq Biotech Index, assuming a $100 investment made on December 31, 2019. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
Stock Performance Graph The following stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1934, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Stock Performance Graph The following stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 65 Table of Contents Sales of Unregistered Securities There were no sales of unregistered securities by us during the fourth quarter of 2023.
The stock performance shown on the graph below is not necessarily indicative of future price performance. Sales of Unregistered Securities 55 Table of Contents There were no sales of unregistered securities by us during the fourth quarter of 2024.
Holders of Record As of February 26, 2024, there were approximately 63 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Holders of Record As of February 24, 2025, there were approximately 59 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
The Repurchase Program may be carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
The Repurchase Program may be carried out, subject to approval by the committee of the Board of Directors, through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans. Issuer Repurchases of Equity Securities and Withholding of Equity Securities During the quarter ended December 31, 2023, we effected stock repurchases pursuant to our stock repurchase program.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans.
Shares repurchased by us or withheld to satisfy tax withholding obligations during each month of the quarter ended December 31, 2023 were as follows: Total Number of Shares Purchased or Withheld Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Program (4) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) October 1, 2023 - October 31, 2023 103,711 (1) $ 5.86 92,000 $ 47.2 (4) November 1, 2023 - November 30, 2023 1,950,633 (2) 9.29 1,931,190 29.2 (4) December 1, 2023 - December 31, 2023 780,625 (3) 9.77 755,569 21.9 (4) Total 2,834,969 2,778,759 (1) Comprised of: (a) 11,711 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $6.51, which represents the average fair market value of our common stock on the date of withholding, and (b) 92,000 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $5.78.
Shares repurchased by us or withheld to satisfy tax withholding obligations during each month of the quarter ended December 31, 2024 were as follows: Total Number of Shares Purchased or Withheld Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Program (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) October 1, 2024 - October 31, 2024 32,051 (1) $ 32.05 — $ 21.4 (2) November 1, 2024 - November 30, 2024 77,889 (1) 23.04 — 21.4 (2) December 1, 2024 - December 31, 2024 17,952 (1) 22.80 — — (2) Total 127,892 — (1) Represents shares of our common stock withheld from employees for the payment of taxes.
Removed
(2) Comprised of: (a) 19,443 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $7.18, which represents the average fair market value of our common stock on the date of withholding, and (b) 1,931,190 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $9.31.
Added
Issuer Repurchases of Equity Securities and Withholding of Equity Securities During the quarter ended December 31, 2024, we did not purchase any shares of our common stock pursuant to our stock repurchase program.
Removed
(3) Comprised of: (a) 25,056 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $11.43, which represents the average fair market value of our common stock on the date of withholding, and (b) 755,569 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $9.71.
Added
The Repurchase Program was renewed on February 20, 2025 where we may purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on February 20, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Revenue Recognition We recognize revenue from testing services, product sales and patient and digital solutions in the amount that reflects the consideration which it expects to be entitled in exchange for goods or services as it transfers control to its customers.
Revenue Recognition We recognize revenue from testing services, product sales and patient and digital solutions revenue in the amount that reflects the consideration which it expects to be entitled in exchange for goods or services as it transfers control to its customers.
Testing Services Revenue AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung patient tests are ordered by healthcare providers. We receive a test requisition form with payer information along with a collected patient blood sample. We consider the patient to be our customer and the test requisition form to be the contract. Testing services are performed in our laboratory.
Testing Services Revenue AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung patient tests are ordered by healthcare providers. We receive a test requisition form with payer information along with a collected patient blood sample. We consider the patient to be our customer and the test requisition form to be the contract. Testing services are performed in our laboratory.
Cash Flows from Investing Activities For the year ended December 31, 2023, net cash provided by investing activities was $40.4 million and primarily related to proceeds from maturities of marketable securities of $256.0 million and sale of corporate equity securities of $2.5 million.
For the year ended December 31, 2023, net cash provided by investing activities was $40.4 million and primarily related to proceeds from maturities of marketable securities of $256.0 million and sale of corporate equity securities of $2.5 million.
We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the reporting unit’s fair value. In connection with our annual goodwill assessment on December 1, 2023, we performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions; and our market capitalization.
We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the reporting unit’s fair value. In connection with our annual goodwill assessment on December 1, 2024, we performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions, and our market capitalization.
Based on this analysis, we concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at that time. As of December 31, 2023, no impairment of goodwill has been identified.
Based on this analysis, we concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at that time. As of December 31, 2024, no impairment of goodwill has been identified.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2023 was $29.6 million and primarily related to repurchase and retirement of common stock of $27.5 million, taxes paid related to net share settlements of restricted stock units of $3.1 million and payments of contingent consideration of $0.6 million.
Net cash used in financing activities for the year ended December 31, 2023 was $29.6 million and primarily related to repurchase and retirement of common stock of $27.5 million, taxes paid related to net share settlements of restricted stock units of $3.1 million and payments of contingent consideration of $0.6 million.
As of December 31, 2023, no impairment of acquired in-process technology assets has been identified. Intangible assets and long-lived assets subject to amortization We evaluate our finite-lived intangible assets and our long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
As of December 31, 2024, no impairment of acquired in-process technology assets has been identified. Intangible assets and long-lived assets subject to amortization We evaluate our finite-lived intangible assets and our long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
Recently Issued Accounting Standards Refer to Note 2, Summary of Significant Accounting Policies - Recent Accounting Pronouncements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position and cash flows.
Recently Issued Accounting Standards Refer to Note 2, Summary of Significant Accounting Policies - Recent Accounting Pronouncements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position and cash flows. 66 Table of Contents
Patient and Digital Solutions Revenue Patient and digital solutions revenue is mainly derived from a combination of SaaS and perpetual software license agreements entered into with various transplant centers, which are our customers for this class of revenue.
Patient and Digital Solutions Revenue Patient and digital solutions revenue is primarily derived from a combination of SaaS and perpetual software license agreements entered into with various transplant centers, which are our customers for this class of revenue.
The main performance obligations in connection with our SaaS and perpetual software license agreement are the following: (i) implementation services and delivery of the perpetual software license are considered a single performance obligation, (ii) post contract support. We allocate the transaction price to each performance obligation based on relative stand-alone selling prices of each distinct performance obligation.
The main performance obligations in connection with our SaaS and perpetual software license agreements are the following: (i) implementation services and delivery of the perpetual software license, which are considered a single performance obligation, (ii) post contract support. We allocate the transaction price to each performance obligation based on relative stand-alone selling prices of each distinct performance obligation.
Some of these accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Some of these accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of 63 Table of Contents matters that are inherently uncertain. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Contractual Obligations For a discussion regarding our significant contractual obligations as of December 31, 2023 and the effect those obligations are expected to have on our liquidity and cash flows in future periods, please refer to Note 9 of the consolidated financial statements, and “Results of Operations—Liquidity and Capital Resources”, respectively, included elsewhere in this Annual Report on Form 10-K.
Contractual Obligations For a discussion regarding our significant contractual obligations as of December 31, 2024 and the effect those obligations are expected to have on our liquidity and cash flows in future periods, please refer to Note 9, Commitments and Contingencies , of the consolidated financial statements, and “Results of Operations—Liquidity and Capital Resources”, respectively, included elsewhere in this Annual Report on Form 10-K.
Business Combinations We determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are 73 Table of Contents separable from goodwill.
Business Combinations We determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are separable from goodwill.
We incur costs in connection with collecting and shipping all samples and a portion of the costs when we cannot ultimately issue a report. As a result, the number of patient samples received largely correlates directly to the number of patient results reported.
We incur costs in connection with collecting and 57 Table of Contents shipping all samples and a portion of the costs when we cannot ultimately issue a report. As a result, the number of patient samples received largely correlates directly to the number of patient results reported.
For a discussion regarding our cash flows for the year ended December 31, 2021, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023.
For a discussion regarding our cash flows for the year ended December 31, 2022, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024.
We then compare the carrying amounts of the assets with the future net undiscounted cash flows expected to be generated by such asset. If an impairment exists, we measure the impairment based on the excess carrying value of the asset over the asset’s fair value determined using discounted estimates of future cash flows.
We then compare the carrying amounts of an asset group with the future net undiscounted cash flows expected to be generated by such asset group. If an impairment exists, we measure the impairment based on the excess carrying value of the asset group over the asset group’s fair value determined using discounted estimates of future cash flows.
Transaction prices are determinable and 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.
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 obligation related to a contract and revenue is recognized at the point of delivery consistent with the terms of the contract or purchase order.
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. We recognize revenue from medication sales when prescriptions are delivered.
We generally bill 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. We recognize revenue from medication sales when prescriptions are delivered.
We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled. In addition, we derive patient and digital solutions revenue from software subscriptions and medication sales. We generally bill software subscription fees in advance.
We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled. 64 Table of Contents In addition, we derive patient and digital solutions revenue from software subscriptions and medication sales.
Impairment of Goodwill, Intangible Assets and Long-lived Assets Goodwill Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. Our annual impairment test date is December 1 st .
Impairment of Goodwill, Intangible Assets and Long-lived Assets Goodwill Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable.
These payments were partially offset by the proceeds from exercises of stock options of $2.4 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $2.2 million.
These payments were partially offset by the proceeds from exercises of stock options of $8.9 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $1.4 million.
We recognize product revenue from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. We generally have a contract or a purchase order from a customer with the specified required terms of order, including the number of products ordered.
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. We generally have 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.
Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission.
Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the SEC. Historical results are not necessarily indicative of future results.
The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
The Repurchase Program may be carried out, subject to approval by the committee of the Board of Directors, through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
Net cash used in financing activities for the year ended December 31, 2022 was $4.5 million and primarily related to taxes paid related to net share settlements of restricted stock units of $5.9 million, payments of contingent consideration of $2.6 million, and repurchase and retirement of common stock of $0.6 million.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2024 was $5.6 million and primarily related to repurchase and retirement of common stock of $0.5 million, taxes paid related to net share settlements of restricted stock units of $10.1 million and payments of contingent consideration of $5.3 million.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash (used in) provided by: Operating activities $ (18,388) $ (25,239) $ (19,294) Investing activities 40,446 (228,502) 47,712 Financing activities (29,606) (4,535) 185,642 Effect of exchange rate changes on cash, cash equivalents and restricted cash (112) 23 (303) Net (decrease) increase in cash, cash equivalents and restricted cash $ (7,660) $ (258,253) $ 213,757 Cash Flows from Operating Activities Net cash used in operating activities consists of net loss, adjusted for certain noncash items in the consolidated statements of operations and changes in operating assets and liabilities.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ 38,048 $ (18,388) $ (25,239) Investing activities (483) 40,446 (228,502) Financing activities (5,606) (29,606) (4,535) Effect of exchange rate changes on cash, cash equivalents and restricted cash 532 (112) 23 Net increase (decrease) in cash, cash equivalents and restricted cash $ 32,491 $ (7,660) $ (258,253) Cash Flows from Operating Activities Net cash provided by (used in) operating activities consists of net income (loss), adjusted for certain noncash items in the consolidated statements of operations and changes in operating assets and liabilities.
Cost of patient and digital solutions Cost of patient and digital solutions increased by $3.7 million, or 17%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Cost of patient and digital solutions Cost of patient and digital solutions increased by $4.7 million, or 18%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that 71 Table of Contents are not readily apparent from other sources.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
AlloSeq HCT received CE mark authorization in May 2022. Continued Growth of Patient and Digital Sales The growth of our patient and digital revenues is tied to the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing MedActionPlan, Ottr and XynManagement customers.
Continued Growth of Patient and Digital Sales The growth of our patient and digital revenues is tied to the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing MedActionPlan, Ottr and XynManagement customers.
Accordingly, amortization of the acquired in-process technology assets and favorable license agreement will not occur until the products reach commercialization. 74 Table of Contents During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the acquired in-process technology assets are less than their carrying amounts.
During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the acquired in-process technology assets are less than their carrying amounts.
Sales and marketing Sales and marketing expenses decreased by $12.7 million, or (13)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a decrease in headcount and personnel-related costs of $7.0 million, a decrease in stock-based compensation expense of $1.9 million, a decrease in travel costs of $1.1 million and a decrease in tradeshows and events of $2.3 million.
Sales and marketing Sales and marketing expenses decreased by $1.6 million, or (2)%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to a decrease in stock-based compensation expense of $1.4 million, a decrease in travel costs of $0.6 million and a decrease in tradeshows and events of $1.6 million, offset by an increase in personnel-related costs of $2.2 million.
General and administrative General and administrative expenses increased by $17.5 million, or 17%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to an increase in legal expenses of $6.3 million, an increase in stock-based compensation expense of $4.9 million, an increase in software expense of $2.8 million and an increase in personnel-related costs of $2.6 million.
General and administrative General and administrative expenses increased by $5.9 million, or 5%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase in stock-based compensation expense of $19.5 million, and an increase in personnel-related costs of $8.8 million, offset by a decrease in legal expenses of $18.5 million, a decrease in other expenses of $4.5 million.
Shelf Registration Statement On May 10, 2023, we filed a universal shelf registration statement (File No. 333-271814), or the Registration Statement, whereby we can sell from time to time up to $250.0 million of shares of our common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for our own account in one or more offerings under the Registration Statement.
The SEC declared the Registration Statement effective on May 23, 2024, and as a result, we can sell from time to time up to $250.0 million of shares of our common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for our own account in one or more offerings under the Registration Statement.
Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies , of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition.
We re-measure this liability each reporting period and record changes in the fair value as a component of operating expenses. Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition.
Although these countries are considered economically stable and we have experienced no notable burden from foreign exchange transactions, export duties or government regulations, unanticipated events in foreign countries could have a material adverse effect on our operations. 83 Table of Contents
Foreign Operations The accompanying consolidated balance sheets contain certain recorded assets in foreign countries, namely Stockholm, Sweden, and Fremantle, Australia. Although these countries are considered economically stable and we have experienced no notable burden from foreign exchange transactions, export duties, government regulations, or unanticipated events in foreign countries could have a material adverse effect on our operations.
Research and development Research and development expenses decreased by $8.5 million, or (9)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a decrease in headcount and personnel-related costs of $3.6 million, a decrease in consulting and professional fees of $3.8 million and a decrease in stock-based compensation expense of $0.8 million.
Research and development Research and development expenses decreased by $9.5 million, or (12)%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to a decrease in clinical trials of $6.5 million, a decrease in consulting and professional fees of $2.4 million and a decrease in software costs of $0.5 million.
For the year ended December 31, 2022, we recorded an income tax expense of $0.4 million on a loss before income taxes of $76.2 million.
Income tax expense For the year ended December 31, 2024, we recorded an income tax expense of $0.3 million on an income before income taxes of $52.9 million.
The difference in the effective tax rate for the year ended December 31, 2023 from the federal statutory tax rate is mainly due to the state income tax expense per the new research and development regulations, whereas in prior years we only recognized the deferred tax assets from foreign losses with the full valuation allowance.
The difference in the effective tax rate for the year ended December 31, 2023 from the federal statutory tax rate is mainly due to the state income tax expense per the new research and development regulations, whereas in prior years we only recognized the deferred tax assets from foreign losses with the full valuation allowance. 61 Table of Contents Liquidity and Capital Resources We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $626.2 million at December 31, 2024.
Restructuring costs Restructuring costs of $2.3 million were incurred for the year ended December 31, 2023, which relate to employee severance pay and related costs. Litigation expense Litigation expense relates to the patent infringement claims filed by Natera against us and alleging that our product, AlloSure, infringes Natera's U.S. Patent 11,111,544.
Restructuring costs Restructuring costs decreased by $0.5 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to lesser headcount impacted by restructuring. Litigation expense Litigation expense relates to the patent infringement claims filed by Natera against us and alleged that our product, AlloSure, infringes Natera's U.S. Patent 11,111,544.
The jury awarded Natera an amount of $96.3 million and we recorded the amount as litigation expense for the year ended December 31, 2023.
The jury awarded Natera an amount of $96.3 million and we recorded the amount as litigation expense for the year ended December 31, 2023. In February 2025, the District Court ruled that the patents asserted against us are invalid. We reversed the $96.3 million of litigation expense in the year ended December 31, 2024.
During the year ended December 31, 2023 , we purchased an aggregate of 2,942,997 shares of our common stock under the Repurchase Program for an aggregate purchase price of $27.5 million. As of December 31, 2023, $21.9 million remained available for future repurchases under the Repurchase Program.
During the year ended December 31, 2024 , we purchased an aggregate of 55,500 shares of our common stock under the Repurchase Program for an aggregate purchase price of $0.5 million.
For the year ended December 31, 2022, net cash used in investing activities was $228.5 million and primarily related to the purchase of short-term marketable securities of $315.1 million, additions of capital expenditures, net of $21.2 million, payments for acquired intangibles of $3.1 million, and acquisition of business, net of cash acquired of $0.6 million.
Cash Flows from Investing Activities For the year ended December 31, 2024, net cash used in investing activities was $0.5 million and primarily related to purchase of short-term marketable securities of $160.3 million, additions of capital expenditures of $6.5 million and purchase of corporate equity securities of $0.6 million, offset by maturities of short-term marketable securities of $166.9 million.
Cost of product Cost of product increased by $0.7 million , or 4%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to an increase in cost of goods from sale of products, partially offset by cost saving measures.
Cost of product 59 Table of Contents Cost of product increased by $5.0 million , or 27%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase in product revenue.
Historical results are not necessarily indicative of future results. Overview and Recent Highlights We are a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers.
Overview We are a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers. We offer testing services, products, and patient and digital solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients.
Amounts received may vary amongst payers based on coverage practices and policies of the payer. We have used the portfolio approach, a practical expedient under Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers , to identify financial classes of payers.
We have used the portfolio approach, a practical expedient under Accounting Standards Codification, or 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.
Digital revenue in connection with perpetual software license agreements is recognized over time based on our 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.
Digital revenue in connection with perpetual software license agreements is recognized at the point in time when control of the license is transferred and made available for the customer's use and benefit. Perpetual software license agreements typically require advance payments from customers upon the achievement of certain milestones.
Product revenue Product revenue increased by $4.3 million, or 15%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to growth from NGS typing products.
Product revenue Product revenue increased by $7.3 million, or 22%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to higher demand of our commercial NGS-based kitted solutions.
Patient and digital solutions revenue Patient and digital solutions revenue increased by $8.3 million, or 29%, during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to organic growth related to our digital offerings and pharmacy revenue of $2.7 million, with the remaining increase driven by the acquisitions of HLA Data Systems and MediGO.
Patient and digital solutions revenue Patient and digital solutions revenue increased by $6.5 million, or 18%, during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to revenue generated from HLA Data Systems, MediGO, Transplant Pharmacy and other core digital offerings.
Other income (expense), net Other income (expense), net, increased by $4.2 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $1.5 million gain from sale of our investment in Miromatrix, a $1.0 million gain from settlement of an obligation and a $1.1 million gain from the recovery of an impaired loan that was already written-off and was included in the purchase price of an asset acquisition of a private entity.
Other income, net During the year ended December 31, 2023, the following events occurred: a $1.0 million gain from settlement of an obligation and a $1.1 million gain from the recovery of an impaired loan that was already written-off, offset by a decrease in unrealized investment loss of $0.3 million.
Spending on research and development for both experiments and studies may vary significantly by quarter depending on the timing of these various expenses. 78 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 (In thousands) Year Ended December 31, 2023 2022 Change Revenue: Testing services revenue $ 209,685 $ 263,748 $ (54,063) Product revenue 33,517 29,251 4,266 Patient and digital solutions 37,122 28,794 8,328 Total revenue 280,324 321,793 (41,469) Operating expenses: Cost of testing services 57,642 72,286 (14,644) Cost of product 18,379 17,639 740 Cost of patient and digital solutions 25,978 22,287 3,691 Research and development 81,866 90,388 (8,522) Sales and marketing 83,334 96,027 (12,693) General and administrative 117,868 100,397 17,471 Restructuring cost 2,320 — 2,320 Litigation expense 96,300 — 96,300 Total operating expenses 483,687 399,024 84,663 Loss from operations (203,363) (77,231) (126,132) Other income (expense): Interest income, net 11,867 3,762 8,105 Change in estimated fair value of common stock warrant liability 10 107 (97) Other income (expense), net 1,343 (2,872) 4,215 Total other income 13,220 997 12,223 Loss before income taxes (190,143) (76,234) (113,909) Income tax (expense) benefit (141) (379) 238 Net loss $ (190,284) $ (76,613) $ (113,671) Testing services revenue Testing services revenue decreased by $54.1 million, or (20)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Spending on research and development for both experiments and studies may vary significantly by quarter depending on the timing of these various expenses. 58 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 (In thousands) Year Ended December 31, 2024 2023 Change Revenue: Testing services revenue $ 249,381 $ 209,685 $ 39,696 Product revenue 40,783 33,517 7,266 Patient and digital solutions 43,621 37,122 6,499 Total revenue 333,785 280,324 53,461 Operating expenses: Cost of testing services 55,611 57,642 (2,031) Cost of product 23,381 18,379 5,002 Cost of patient and digital solutions 30,638 25,978 4,660 Research and development 72,405 81,866 (9,461) Sales and marketing 81,718 83,334 (1,616) General and administrative 123,784 117,868 5,916 Restructuring cost 1,783 2,320 (537) Litigation expense (96,300) 96,300 (192,600) Total operating expenses 293,020 483,687 (190,667) Income (loss) from operations 40,765 (203,363) 244,128 Other income: Interest income, net 11,765 11,867 (102) Change in estimated fair value of common stock warrant liability — 10 (10) Other income, net 329 1,343 (1,014) Total other income 12,094 13,220 (1,126) Income (loss) before income taxes 52,859 (190,143) 243,002 Income tax expense (310) (141) (169) Net income (loss) $ 52,549 $ (190,284) $ 242,833 Testing services revenue Testing services revenue increased by $39.7 million, or 19%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Cost of testing services Cost of testing services decreased by $14.6 million, or (20)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Cost of testing services Cost of testing services decreased by $2.0 million, or (4)%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease is primarily driven by efficiency measures to lower laboratory expenses.
Our net loss also included the following noncash items: $46.6 million in 82 Table of Contents stock-based compensation expense, $11.6 million of depreciation and amortization expense, amortization of right-of-use assets of $4.4 million, asset impairments and write-downs of $0.8 million, unrealized loss on long-term marketable equity securities of $1.2 million and amortization of premium on short-term marketable securities, net of $0.4 million.
Our noncash items included $66.4 million in stock-based compensation expense, $14.2 million of depreciation and amortization expense, $5.6 million of amortization of right-of-use assets, $0.6 million of amortization of premium on short-term marketable securities, net, and revaluation of contingent consideration to estimated fair value of $0.9 million.
Cash used in operating activities was also due to an increase in accounts receivable of $16.0 million. Cash used in operating activities was partially offset by an increase in net operating assets of $90.6 million. Net cash used in operating activities for the year ended December 31, 2022 was $25.2 million.
Cash used in operating activities was also due to an increase in accounts receivable of $16.0 million. Cash used in operating activities was partially offset by an increase in net 62 Table of Contents operating assets of $90.6 million including litigation expense of $96.3 million recorded as other liabilities related to the jury award in the Natera IP infringement matter.
The first and second revenue recognition criteria are satisfied when we receive a test requisition form with payer information from the healthcare provider. Generally, we bill third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart or AlloSure Lung test result to the healthcare provider.
Generally, we bill third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare or AlloSure Lung test result to the healthcare provider. Amounts received may vary amongst payers based on coverage practices and policies of the payer.
Interest income, net Interest income, net, increased by $8.1 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to interest income earned on U.S. agency securities and corporate debt securities as a result of rising interest rates.
Interest income, net Interest income, net, decreased by $0.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to a decrease in interest rates.
Income tax (expense) benefit 80 Table of Contents For the year ended December 31, 2023, we recorded an income tax expense of $0.1 million on a loss before income taxes of $190.1 million.
The effective tax rate for the twelve months ended December 31, 2024 differs from the federal statutory tax rate mainly due to the change in valuation allowance, windfall tax benefits from stock-based compensation, nondeductible executive compensation and tax credits. 60 Table of Contents For the year ended December 31, 2023, we recorded an income tax expense of $0.1 million on a loss before income taxes of $190.1 million.
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. We estimate revenue for non-contracted payers and self-payers using transaction prices determined for each financial class of payers using history of reimbursements.
We estimate 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. This estimate requires significant judgment.
Where the carrying value of the reporting unit exceeds its estimated fair value, we will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.
If the carrying amount of the reporting unit exceeds the fair value, we record an impairment loss based on the difference. We elect to bypass the qualitative assessment in a period and proceeds to perform the quantitative goodwill impairment test.
This includes analysis of an average reimbursement per test and a percentage of tests reimbursed. This estimate requires significant judgment. We monitor revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required.
We monitor 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, our discussions with payers, and other pertinent information.
If this qualitative assessment indicates that it is more likely than not that an impairment exists, or if we decide to bypass this option, we proceed to perform the quantitative assessment. The quantitative assessment consists of a comparison between the estimated fair value of our reporting unit and its respective carrying amount including goodwill.
If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the reporting unit with the carrying value, including goodwill.
As of December 31, 2023, we had cash, cash equivalents and marketable securities of $235.4 million, and no debt outstanding. With our continuing growth, we may require additional financing in the future to fund working capital and our development of future products.
As of December 31, 2024, we had cash, cash equivalents and marketable securities of $260.7 million, and no debt outstanding.
The Medicare reimbursement rate for AlloSure Lung is $2,753. Cellular Therapy In April 2020, we initiated a 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. AlloCell is being commercialized through research 69 Table of Contents agreements with biopharma companies developing cell therapies.
We have initiated several clinical studies to generate data on our existing and planned future testing services. We have signed multiple biopharma research partnerships for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy.
Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our product portfolio includes AlloSeq Tx, QTYPE, Olerup SSP, AlloSeq HCT, and AlloSeq cfDNA.
We also offer 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. We also provide digital solutions to transplant centers and various offerings in patient and digital solutions.
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We offer testing services, products and patient and digital healthcare solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients. Testing Services We develop and provide diagnostic surveillance testing services for solid organ transplant recipients, hematopoietic stem cell transplant recipients and recipients of engineered cell therapies.
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A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 is presented under Results of Operations of this Form 10-K. Discussions regarding our financial condition and results of operations for fiscal 2023 compared to 2022 have been omitted from this Annual Report on Form 10-K, but can be found in "Item 7.
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Kidney AlloSure Kidney, our transplant surveillance solution, was commercially launched in October 2017 and is our dd-cfDNA offering. In transplantation there is well-established literature from studies around the world demonstrating the value of dd-cfDNA in the management of solid organ transplantation.
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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024, which is available without charge on the SEC's website at www.sec.gov and on our investor relations website at caredx.com.
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AlloSure Kidney is able to discriminate dd-cfDNA from recipient-cell-free DNA targeting polymorphisms in the DNA with an approach specifically designed for transplantation to differentiate dd-cfDNA.
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Our commercially available testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA, or 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.
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AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination, or LCD, first issued by Palmetto MolDX, or MolDX, which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, our Medicare Administrative Contractor, or Noridian.
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See Part I, Item 1 (Business) of this Annual Report on Form 10-K for further information about our business.
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The Medicare reimbursement rate for AlloSure Kidney is currently $2,841. In March and May 2023, MolDX issued new billing articles related to the LCD entitled Molecular Testing for Solid Organ Allograft Rejection.
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Fourth Quarter Business Highlights • Sixth consecutive quarter of sequential testing services volume growth • AlloSure® Kidney surveillance testing continued to increase in the fourth quarter • Submitted first manuscript of the Kidney Outcomes Allograft Rejection (KOAR) study for publication • Published study in the journal Transplant International shows AlloSeq cfDNA highly accurate in detecting organ transplant rejection Full Year 2024 Financial Highlights • Revenue of $333.8 million, driven by testing services revenue growth of 19% year-over-year • Testing services revenue of $249.4 million, increased 19% year-over-year, and testing services volume of approximately 176,000, increased 6% year-over-year • Patient and digital solutions revenue of $43.6 million and product revenue of $40.8 million, representing year-over-year growth of 18% and 22%, respectively • GAAP net income of $52.5 million • Cash flow from operations of $38 million • Cash, cash equivalents, and marketable securities of $261 million, with no debt, as of December 31, 2024 Factors Affecting Our Performance The Number of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung Tests We Receive and Report The growth of our testing services is tied to the number of AlloSure Kidney, AlloMap Heart and AlloSure Heart, HeartCare and AlloSure Lung patient samples we receive and patient results we report.
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The billing articles issued in May 2023, or the Revised Billing Article, and together with the billing article issued in March 2023, the Billing Articles, impacted Medicare coverage for AlloSure Kidney, AlloSure Heart, AlloMap Heart and AlloSure Lung, and required certain companies, including us, to implement new processes to address the requirements related to Medicare claim submissions.
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Revenue increase is primarily driven by testing services volume growth of 6%, and improved average selling price driven by increased collections including collections related to tests performed in prior periods.
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Noridian adopted the Revised Billing Article on August 17, 2023, with a retroactive effective date of March 31, 2023.
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The increase in stock-based compensation expense was primarily due to accelerated vesting over a shortened service period for awards held by the former CEO and former General Counsel of $14.3 million.
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Although we believe the Billing Articles are inconsistent with the LCDs, Noridian’s and MolDX’s responses to public comments explaining the intended scope of various LCDs, and medical necessity, we determined to pause our Medicare reimbursement submissions for AlloSure Kidney commencing on March 7, 2023 to allow us further time to evaluate the implications of the Billing Article and update our billing processes for AlloSure Kidney tests by educating clinicians and working with centers to update our test order forms to capture the new information required under the Billing Article.
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During the year ended December 31, 2024, there was a $0.5 million gain from a reduction in contingent consideration and an increase in other business expense of $0.3 million. These resulted in a decrease in other income, net, of $1.0 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Foreign Currency Exchange Risk We have operations in Sweden and Australia and sell to other countries throughout the world. As a result, we are subject to significant foreign currency risks, including transacting in foreign currencies, investment in a foreign entity, as well as assets and debts denominated in foreign currencies. Our testing services revenue is primarily denominated in U.S. dollars.
Foreign Currency Exchange Risk We have operations in Sweden and sell to other countries throughout the world. As a result, we are subject to foreign currency risks, including transacting in foreign currencies, investment in a foreign entity, as well as assets and debts denominated in foreign currencies. Our testing services revenue is primarily denominated in U.S. dollars.
A portion of our operating expenses are incurred outside of the U.S. and are denominated in Swedish Krona, the Euro, and the Australian dollar, which are also subject to fluctuations due to changes in foreign currency exchange rates.
A portion of our operating expenses are incurred outside of the U.S. and are denominated in Swedish Krona, and the Euro, which are also subject to fluctuations due to changes in foreign currency exchange rates.
However, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would have an approximate impact of $2.4 million on our consolidated balance sheets.
However, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would have an approximate impact of $1.1 million on our consolidated balance sheets.
An unfavorable 10% change in foreign currency exchange rates for our assets and liabilities denominated in foreign currencies at December 31, 2023, would have negatively impacted our financial results for the year ended December 31, 2023 by $0.6 million and our product revenue by $1.4 million.
An unfavorable 10% change in foreign currency exchange rates for our assets and liabilities denominated in foreign currencies at December 31, 2024, would have negatively impacted our consolidated balance sheets for the year ended December 31, 2024 by $0.1 million and our product revenue by $1.5 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business. We had cash and cash equivalents of $114.7 million at December 31, 2024, which consisted of bank deposits and money market funds.
Currently, we do not have any near-term plans to enter into a formal hedging program to mitigate the effects of foreign currency volatility. We will continue to reassess our approach to managing our risk relating to fluctuations in foreign currency exchange rates. 84 Table of Contents
Currently, we do not have any near-term plans to enter into a formal hedging program to mitigate the effects of foreign currency volatility but may do so in the future if our exposure to foreign currencies should become more significant.
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We had cash and cash equivalents and marketable securities of $235.4 million at December 31, 2023, which consisted of bank deposits and money market funds, and we had cash, cash equivalents and marketable securities of $293.1 million at December 31, 2022, which consisted of bank deposits and money market funds.
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We will continue to reassess our approach to managing our risk relating to fluctuations in foreign currency exchange rates. 67 Table of Contents

Other CDNA 10-K year-over-year comparisons