CareDx, Inc.
Nov 9, 2016

CareDx Reports Third Quarter 2016 Financial Results

BRISBANE, Calif., Nov. 09, 2016 (GLOBE NEWSWIRE) -- CareDx, Inc. (Nasdaq:CDNA), a molecular diagnostics company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients, today reported financial results for the third quarter ended September 30, 2016.

Recent highlights:

"We continue to execute on our growth strategy, with a successful first full quarter of integration of the Olerup products and further development of our pipeline products, most importantly AlloSure," said Peter Maag, CareDx President and Chief Executive Officer. "The reimbursement team has also made significant progress in catching up on collections."

Third Quarter Financial Results
Revenue for the three months ended September 30, 2016 increased to $12.5 million, up from $7.2 million in the same period in 2015, reflecting the contribution of Olerup sales following the acquisition. Pro forma revenue growth was 13% year-over-year. The revenue trend also reflects $0.9 million of catch up revenue from progress in cash collections.

For the third quarter of 2016, net loss was $3.8 million compared to net loss of $3.5 million in the third quarter of 2015.  Diluted net loss per share were $0.26 in the third quarter of 2016, compared to diluted net loss per share of $0.29 in the third quarter of 2015.

For the third quarter of 2016, non-GAAP net loss was $2.9 million compared to non-GAAP net loss of $3.5 million in the third quarter of 2015.  Non-GAAP basic and diluted net loss per share were $0.15 in the third quarter of 2016, compared to non-GAAP basic and diluted net loss per share of $0.29 in the third quarter of 2015. For additional information regarding non-GAAP financial measures discussed herein, please see "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

Cash and cash equivalents were $22.3 million as of September 30, 2016.

For more information regarding our results, please see "Purchase Accounting" below.    

2016 Guidance
For the full year 2016, we are narrowing our revenue guidance to the high end of our previously stated range. We expect fiscal 2016 revenue to grow by low- to mid-single digits on a pro forma basis over fiscal 2015 revenue, assuming that the Allenex acquisition closed on January 1, 2016.  Actual reported results will only include Allenex results subsequent to the close of the acquisition on April 14, 2016, and we expect reported revenue for the full year 2016 to be in the range of $41 million to $42 million.

Purchase Accounting
The Company has accounted for the acquisition of Allenex as a business combination. Under business combination accounting, the total purchase price was allocated to Allenex's net tangible and identifiable intangible assets based on their estimated fair values as of April 14, 2016, the closing date, which are reflected in our Condensed Consolidated Balance Sheet on a preliminary basis as of September 30, 2016 as set forth herein. The excess of the purchase price over the preliminary net tangible and identifiable intangible assets was recorded as goodwill. The preliminary allocation of the purchase price was based upon a third-party valuation and our estimates and assumptions, which are subject to change. The primary areas of the purchase price allocation that are not yet finalized relate to valuation of acquired inventory, income and non-income based taxes and residual goodwill. In addition, upon the finalization of the combined company's legal entity structure, additional adjustments to deferred taxes may be required. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under GAAP, as additional information is obtained about the facts and circumstances that existed as of the acquisition closing date.  Any potential adjustments made could be material in relation to the amounts presented in our financial statements.

Conference Call
Management will host a conference call today beginning at 1:30 pm PT/4:30 pm ET.  Individuals interested in listening to the conference call may do so by dialing (855) 420-0616 for domestic callers or (678) 304-6848 for international callers. Please reference Conference ID: 7448753. To listen to a live webcast, please visit the investor relations section of CareDx's website at:

A replay of the call will be available beginning November 9, 2016 at 4:30 pm PT/7:30 pm ET through 4:30 pm PT/7:30 pm ET on November 10, 2016. To access the replay, dial (855) 859-2056 or (404) 537-3406 and reference Conference ID: 7448753. The webcast will also be available on CareDx's website for one year following the completion of the call.

About CareDx
CareDx, Inc., headquartered in Brisbane, California, is a global molecular diagnostics company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients. CareDx offers AlloMap®, a gene expression test that aids clinicians in identifying heart transplant patients with stable graft function who have a low probability of moderate to severe acute cellular rejection (ACR). CareDx is developing additional products for transplant monitoring using a variety of technologies, including AlloSure®, a proprietary next-generation sequencing-based test to detect donor-derived cell-free DNA (dd-cfDNA) after transplantation.

CareDx, with its presence through Olerup, also develops, manufactures, markets and sells 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. Olerup SSP® is a set of HLA typing products used prior to hematopoietic stem cell/bone marrow transplantation and organ transplantation. XM-ONE® is the first standardized test that quickly identifies a patient's antigens against HLA Class I, Class II or antibodies against a donor's endothelium. For more information, please visit:

Forward Looking Statements
In addition to historical information, this press release contains forward-looking statements with respect to our business, research, development and commercialization efforts and anticipated future financial results, including our guidance for full fiscal 2016 revenue and statements regarding the potential adjustment of the purchase accounting for the Company's acquisition of Allenex on April 14, 2016. These forward-looking statements are based upon information that is currently available to us and our current expectations, speak only as of the date hereof, and are subject to numerous risks and uncertainties, including risks related to our ability to complete diagnostic studies, including obtaining sufficient clinical samples and participation of clinical investigators in such studies, the timeline for completion of research efforts, development and commercialization of additional diagnostic solutions including cell-free DNA, which is a lengthy and complex process that may not be successful, our dependence on Medicare for a substantial portion of our revenue, and our dependence on health insurers and other third-party payers to provide coverage for our current test and future tests, if any, completion of management's and our independent registered public accounting firm's review of our financial statements as of and for the period ended September 30, 2016, obtaining additional information about the fair values of certain assets and liabilities of Allenex that existed as of the April 14, 2016 acquisition date and finalization of the combined company's legal entity structure.  These factors, together with those that are described in our filings with the SEC, including the Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and the Annual Report on Form 10-K for the year ended December 31, 2015 as filed by us with the SEC, may cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by our forward-looking statements. We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any such forward-looking statements.

Use of Non-GAAP Financial Measures
CareDx has presented certain financial information in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and also on a non-GAAP basis in this release, including non-GAAP net loss and non-GAAP basic and diluted net loss per share.  We define non-GAAP net loss and per share results as the GAAP net loss and per share results excluding the impacts of stock-based compensation; changes in estimated fair value of warrants and contingent consideration; acquisition related amortization of intangible assets, purchase accounting adjustments and related tax effects, costs involved with completing an acquisition, and certain financing charges.  We are presenting these non-GAAP financial measures to assist investors in assessing our operating results through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core business operating results over multiple periods. Management believes this non-GAAP information is useful for investors, when considered in conjunction with CareDx's GAAP financial statements, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of CareDx's operating results as reported under GAAP. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not necessarily comparable to similarly-titled measures presented by other companies. A reconciliation between GAAP and non-GAAP financial information is provided immediately following the financial tables.

CareDx, Inc. 
Condensed Consolidated Statements of Operations 
(In thousands, except share and per share data) 
  Three Months Ended September 30, Nine Months Ended September 30, 
   2016   2015   2016   2015  
Testing revenue $8,613   $7,007  $22,317  $21,147  
Product revenue  3,754      7,228     
Collaboration, license and other revenue  108   144   226   349  
Total revenue  12,475   7,151   29,771   21,496  
Operating expenses:         
Cost of testing  2,604   2,568   8,228   7,786  
Cost of product  3,355      6,411     
Research and development  2,930   2,698   9,231   6,629   
Sales and marketing  3,451   2,062   8,544   6,453  
General and administrative  5,180   3,361   16,250   8,553  
Change in estimated fair value of contingent consideration  (112)  (345)  (422)  (456) 
Total operating expenses  17,408   10,344   48,242   28,965  
Loss from operations  (4,933)  (3,193)  (18,471)  (7,469) 
Interest expense  (568)   (251)  (1,351)  (1,334) 
Other expense  (133)  (45)  (3,334)  (142) 
Change in estimated fair value of common stock warrant liability  1,386      (1,779)    
Loss before income taxes  (4,248 )  (3,489)  (24,935)  (8,945) 
Income tax benefit  449      888     
Net loss  (3,799)  (3,489)  (24,047)  (8,945) 
Net loss attributable to noncontrolling interest  35      58     
Net loss attributable to CareDx, Inc. $(3,764) $(3,489) $(23,989) $(8,945) 
Net loss per share attributable to CareDx, Inc.:         
Diluted $(0.26) $(0.29) $(1.61) $(0.76) 
Weighted average shares used to compute net loss per share attributable to CareDx, Inc.:         
Diluted  19,481,424   11,890,057   14,894,218   11,846,921  


CareDx, Inc. 
Condensed Consolidated Balance Sheets 
(In thousands, except share amount and par value) 
  September 30, 2016 December 31, 2015 (1) 
Current assets:     
Cash and cash equivalents $22,265  $29,888  
Accounts receivable  4,568   2,367  
Inventory  7,444   766  
Prepaid and other assets  846   1,341  
Total current assets  35,123   34,362  
Property and equipment, net   3,305   2,425  
Intangible assets, net  35,444   6,650  
Goodwill  28,047   12,005  
Restricted cash  143   147  
Other noncurrent assets  30   49  
Total assets $102,092  $55,638  
Liabilities and stockholders' equity     
Current liabilities:      
Accounts payable $3,464  $1,644  
Accrued payroll liabilities  3,725   2,366  
Accrued and other liabilities  8,204   2,892  
Accrued royalties  310   242  
Deferred revenue  58   142  
Deferred purchase consideration  5,942     
Current portion of long-term debt  17,902   2,866  
Total current liabilities  39,605   10,152  
Deferred rent, net of current portion  1,190    1,426  
Deferred revenue, net of current portion  744   703  
Deferred tax liability  6,896     
Long-term debt, net of current portion  8,496   12,887  
Contingent consideration  526   948  
Common stock warrant liability  6,736     
Other liabilities  1,119   28  
Total liabilities  65,312   26,144  
Stockholders' equity:       
Common stock  21   12  
Additional paid-in capital  235,087   202,564  
Accumulated other comprehensive loss  (1,831)    
Accumulated deficit  (197,071)  (173,082) 
Total CareDx Inc. stockholders' equity  36,206   29,494  
Noncontrolling interest  574     
Total stockholders' equity  36,780   29,494  
Total liabilities and stockholders' equity $102,092  $55,638  
(1)  The condensed balance sheet at December 31, 2015 has been derived from audited financial statements.   


CareDx, Inc. 
Reconciliation of GAAP to Non-GAAP Financial Measures 
(In thousands, except share and per share data) 
  Three Months Ended September 30, Nine Months Ended September 30, 
   2016    2015   2016    2015  
Cost of testing reconciliation:         
GAAP cost of testing $2,604  $2,568  $8,228  $7,786  
Stock-based compensation expense  (38)  (23)  (105)  (91) 
Non-GAAP cost of testing $2,566   $2,545  $8,123  $7,695  
Cost of product reconciliation:         
GAAP cost of product $3,355  $  $6,411  $  
Acquisition related-amortization of purchased intangibles  (343)     (646)    
Acquisition related-amortization of inventory valuation adjustment  (1,273)     (2,438)    
Non-GAAP cost of product $1,739  $  $3,327   $  
Research and development expenses reconciliation:                 
GAAP research and development expenses $2,930  $2,698  $9,231   $6,629  
Stock-based compensation expense  (47)  (80)  (118)  (215) 
Non-GAAP research and development expenses $2,883  $2,618  $9,113  $6,414  
Sales and marketing expenses reconciliation:                 
GAAP sales and marketing expenses $3,451  $2,062  $8,544  $6,453  
Acquisition related-amortization of purchased intangibles  (241)     (454)    
Stock-based compensation expense  (109)  (37)  (321)   (93) 
Non-GAAP sales and marketing expenses $3,101   $2,025  $7,769  $6,360  
General and administrative expenses reconciliation:                 
GAAP general and administrative expenses $5,180  $3,361  $16,250  $8,553  
Acquisition related fees and expenses  (458)     (4,298)    
Stock-based compensation expense  (261)  (198)  (723)  (628) 
Non-GAAP general and administrative expenses $4,461  $3,163  $11,229  $7,925  
Contingent consideration remeasurement reconciliation:                 
GAAP contingent consideration remeasurement $(112) $(345) $(422) $(456) 
Contingent consideration remeasurement  112   345   422   456  
Non-GAAP contingent consideration remeasurement $  $  $  $  
Change in estimated fair value of common stock warrant liability reconciliation:                  
GAAP change in estimated fair value of common stock warrant liability $1,386  $  $(1,779) $  
Change in estimated fair value of common stock warrant liability  (1,386)     1,779     
Non-GAAP change in estimated fair value of common stock warrant liability $  $  $  —  $  
Other expense, net reconciliation:                  
GAAP other expense, net $(133) $(45) $(3,334) $(142) 
Debt financing related fees and expenses        2,939     
Non-GAAP other expense, net $(133) $ (45) $(395) $(142) 
Income tax benefit reconciliation:                  
GAAP income tax benefit $449   $  $888  $  
Tax effect related to amortization of purchased intangibles  (427)     (807 )    
Non-GAAP income tax benefit, net $22  $  $81   $  
Net loss reconciliation:                 
GAAP net loss attributable to CareDx $(3,764) $(3,489) $(23,989) $(8,945) 
Acquisition related-amortization of purchased intangibles  584      1,100     
Acquisition related-amortization of inventory valuation adjustment  1,273      2,438     
Tax effect related to amortization of purchased intangibles  (427)     807     
Acquisition related fees and expenses  458      4,298      
Debt financing related fees and expenses         2,939     
Stock-based compensation expenses  455   338   1,267   1,027  
Contingent consideration remeasurement  (112)  (345)  (422)  (456) 
Warrant liability remeasurement  (1,386)     1,779     
Non-GAAP net loss $(2,919) $(3,496) $(9,783) $(8,374) 
Basic and diluted net loss per share reconciliation:                  
GAAP basic and diluted net loss per share attributable to CareDx $(0.20) $(0.29) $(1.61) $(0.76) 
Acquisition related-amortization of purchased intangibles  0.03      0.07     
Acquisition related-amortization of inventory valuation adjustment  0.07      0.16     
Tax effect related to amortization purchased intangibles  (0.02)     0.05      
Acquisition related fees and expenses  0.02      0.29     
Debt financing related fees and expenses        0.20     
Stock-based compensation expenses  0.02   0.03    0.09   0.09  
Contingent consideration remeasurement  (0.01)  (0.03)  (0.03)  (0.04) 
Warrant liability remeasurement  (0.07)     0.12     
Non-GAAP basic and diluted net loss per share attributable to CareDx $(0.15) $(0.29) $(0.66) $(0.71) 
Non-GAAP adjustment summary:                 
Cost of testing adjustments $38  $23  $105  $ 91  
Cost of sales adjustments  1,616       3,084     
Research and development expenses adjustments  47   80   118   215  
Sales and marketing expenses adjustments  350   37   775   93  
General and administrative expenses adjustments  719   198   5,021   628  
Contingent consideration remeasurement  (112)  (345)  (422)  (456) 
Other expense adjustments        2,939     
Warrant liability remeasurement  (1,386)     1,779     
Tax effect related to amortization of purchased intangibles  (427)     807     
Total Non-GAAP adjustment summary: $845  $(7) $14,206  $571  
Investor Contact

Jamar Ismail, Vice President

Westwicke Partners, LLC

T:  +1 415-513-1282


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Source: CareDx, Inc.

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