cdna-10q_20190630.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to           

Commission file number: 001-36536

 

CAREDX, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

94-3316839

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

3260 Bayshore Boulevard

Brisbane, California 94005

(Address of principal executive offices and zip code)

(415) 287-2300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act

 

 

Title of Each Class

 

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

 

CDNA

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There were 42,383,761 shares of the registrant’s Common Stock issued and outstanding as of July 30, 2019.

 

 

 

 

 

 


 

CareDx, Inc.

TABLE OF CONTENTS

 

 

 

Page No.

PART I. FINANCIAL INFORMATION

 

3

Item 1. Unaudited Condensed Consolidated Financial Statements

 

3

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

3

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018

 

4

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018

 

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018

 

6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

 

8

Notes to Unaudited Condensed Consolidated Financial Statements

 

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 4. Controls and Procedures

 

40

 

 

 

PART II. OTHER INFORMATION

 

41

Item 1. Legal Proceedings

 

41

Item 1A. Risk Factors

 

41

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

42

Item 3. Defaults Upon Senior Securities

 

42

Item 4. Mine Safety Disclosures

 

42

Item 5. Other Information

 

42

Item 6. Exhibits

 

42

Signatures

 

44

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CareDx, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

43,469

 

 

$

64,616

 

Accounts receivable

 

 

17,052

 

 

 

9,760

 

Inventory

 

 

5,341

 

 

 

4,943

 

Prepaid and other current assets

 

 

2,462

 

 

 

1,795

 

Total current assets

 

 

68,324

 

 

 

81,114

 

Property and equipment, net

 

 

3,508

 

 

 

4,134

 

Operating leases right-of-use assets

 

 

2,657

 

 

 

 

Intangible assets, net

 

 

45,604

 

 

 

33,252

 

Goodwill

 

 

22,559

 

 

 

12,005

 

Restricted cash

 

 

255

 

 

 

192

 

Total assets

 

$

142,907

 

 

$

130,697

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,380

 

 

$

4,711

 

Accrued compensation

 

 

7,490

 

 

 

9,156

 

Accrued and other liabilities

 

 

13,750

 

 

 

5,637

 

Total current liabilities

 

 

28,620

 

 

 

19,504

 

Deferred tax liability

 

 

2,310

 

 

 

2,968

 

Common stock warrant liability

 

 

11,286

 

 

 

10,003

 

Deferred payments for intangible assets

 

 

4,930

 

 

 

 

Other liabilities

 

 

2,595

 

 

 

2,294

 

Total liabilities

 

 

49,741

 

 

 

34,769

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock: $0.001 par value; 10,000,000 shares authorized at June 30, 2019

   and December 31, 2018; no shares issued and outstanding at June 30, 2019

   and December 31, 2018

 

 

 

 

 

 

Common stock: $0.001 par value; 100,000,000 shares authorized at June 30, 2019

   and December 31, 2018; 42,306,432 shares and 41,384,960 shares issued and

   outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

42

 

 

 

41

 

Additional paid-in capital

 

 

425,418

 

 

 

412,010

 

Accumulated other comprehensive loss

 

 

(5,071

)

 

 

(4,278

)

Accumulated deficit

 

 

(327,223

)

 

 

(311,845

)

Total stockholders' equity

 

 

93,166

 

 

 

95,928

 

Total liabilities and stockholders’ equity

 

$

142,907

 

 

$

130,697

 

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

3


 

CareDx, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Testing services revenue

 

$

25,677

 

 

$

13,997

 

 

$

47,195

 

 

$

24,601

 

Product revenue

 

 

4,593

 

 

 

3,550

 

 

 

9,026

 

 

 

6,857

 

Digital and other revenue

 

 

1,184

 

 

 

276

 

 

 

1,215

 

 

 

418

 

Total revenue

 

 

31,454

 

 

 

17,823

 

 

 

57,436

 

 

 

31,876

 

Cost of revenue

 

 

11,512

 

 

 

7,207

 

 

 

21,245

 

 

 

13,591

 

Gross profit

 

 

19,942

 

 

 

10,616

 

 

 

36,191

 

 

 

18,285

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

7,630

 

 

 

3,496

 

 

 

13,244

 

 

 

6,864

 

Sales and marketing

 

 

10,644

 

 

 

5,860

 

 

 

17,569

 

 

 

9,945

 

General and administrative

 

 

8,512

 

 

 

5,596

 

 

 

17,618

 

 

 

10,903

 

Change in estimated fair value of contingent consideration

 

 

 

 

 

873

 

 

 

 

 

 

1,017

 

Total operating expenses

 

 

26,786

 

 

 

15,825

 

 

 

48,431

 

 

 

28,729

 

Loss from operations

 

 

(6,844

)

 

 

(5,209

)

 

 

(12,240

)

 

 

(10,444

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

300

 

 

 

(424

)

 

 

642

 

 

 

(3,119

)

Debt extinguishment expenses

 

 

 

 

 

 

 

 

 

 

 

(2,806

)

Change in estimated fair value of common stock warrant liability and derivative liability

 

 

(1,351

)

 

 

(8,768

)

 

 

(4,360

)

 

 

(7,447

)

Other expense, net

 

 

(172

)

 

 

(42

)

 

 

(246

)

 

 

(45

)

Total other income (expense)

 

 

(1,223

)

 

 

(9,234

)

 

 

(3,964

)

 

 

(13,417

)

Loss before income taxes

 

 

(8,067

)

 

 

(14,443

)

 

 

(16,204

)

 

 

(23,861

)

Income tax benefit

 

 

220

 

 

 

381

 

 

 

826

 

 

 

805

 

Net loss

 

 

(7,847

)

 

 

(14,062

)

 

 

(15,378

)

 

 

(23,056

)

Net loss attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(25

)

Net loss attributable to CareDx, Inc.

 

$

(7,847

)

 

$

(14,062

)

 

$

(15,378

)

 

$

(23,031

)

Net loss per share attributable to CareDx, Inc. (Note 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.19

)

 

$

(0.40

)

 

$

(0.37

)

 

$

(0.71

)

Diluted

 

$

(0.19

)

 

$

(0.40

)

 

$

(0.37

)

 

$

(0.71

)

Weighted-average shares used to compute net loss per share attributable to CareDx, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,132,396

 

 

 

35,549,837

 

 

 

41,873,337

 

 

 

32,599,032

 

Diluted

 

 

42,132,396

 

 

 

35,549,837

 

 

 

41,873,337

 

 

 

32,599,032

 

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

 

4


 

CareDx, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(7,847

)

 

$

(14,062

)

 

$

(15,378

)

 

$

(23,056

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

(69

)

 

 

(1,625

)

 

 

(793

)

 

 

(1,762

)

Net comprehensive loss

 

 

(7,916

)

 

 

(15,687

)

 

 

(16,171

)

 

 

(24,818

)

Comprehensive loss attributable to noncontrolling interest, net of tax

 

 

 

 

 

 

 

 

 

 

 

(25

)

Comprehensive loss attributable to CareDx, Inc.

 

$

(7,916

)

 

$

(15,687

)

 

$

(16,171

)

 

$

(24,793

)

 

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


5


 

CareDx, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

41,384,960

 

 

$

41

 

 

$

412,010

 

 

$

(4,278

)

 

$

(311,845

)

 

$

95,928

 

Issuance of common stock under ESPP

 

 

31,184

 

 

 

 

 

 

341

 

 

 

 

 

 

 

 

 

341

 

RSU settlements, net of shares withheld

 

 

146,159

 

 

 

 

 

 

(2,378

)

 

 

 

 

 

 

 

 

(2,378

)

Issuance of common stock for services

 

 

2,112

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Issuance of common stock for cash upon

   exercise of stock options

 

 

253,347

 

 

 

 

 

 

1,365

 

 

 

 

 

 

 

 

 

1,365

 

Issuance of common stock for cash upon

   exercise of warrants

 

 

94,707

 

 

 

 

 

 

2,569

 

 

 

 

 

 

 

 

 

2,569

 

Share-based compensation expense

 

 

 

 

 

 

 

 

6,001

 

 

 

 

 

 

 

 

 

6,001

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(724

)

 

 

 

 

 

(724

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,531

)

 

 

(7,531

)

Balance at March 31, 2019

 

 

41,912,469

 

 

$

41

 

 

$

419,959

 

 

$

(5,002

)

 

$

(319,376

)

 

$

95,622

 

Changes in estimated offering costs

 

 

 

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

50

 

RSU settlements, net of shares withheld

 

 

112,760

 

 

 

 

 

 

(1,597

)

 

 

 

 

 

 

 

 

(1,597

)

Issuance of common stock for services

 

 

1,663

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

 

52

 

Issuance of common stock for cash upon

   exercise of stock options

 

 

240,734

 

 

 

1

 

 

 

1,404

 

 

 

 

 

 

 

 

 

1,405

 

Issuance of common stock for cash upon

   exercise of warrants

 

 

38,806

 

 

 

 

 

 

612

 

 

 

 

 

 

 

 

 

612

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,938

 

 

 

 

 

 

 

 

 

4,938

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(69

)

 

 

 

 

 

(69

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,847

)

 

 

(7,847

)

Balance at June 30, 2019

 

 

42,306,432

 

 

$

42

 

 

$

425,418

 

 

$

(5,071

)

 

$

(327,223

)

 

$

93,166

 

6


 

CareDx, Inc.

Condensed Consolidated Statements of Stock and Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

Stockholders’

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Interests

 

 

(Deficit)

 

Balance at December 31, 2017

 

 

28,825,019

 

 

$

29

 

 

$

264,204

 

 

$

(2,346

)

 

$

(268,022

)

 

$

180

 

 

$

(5,955

)

Adoption of ASC 606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,933

 

 

 

 

 

 

2,933

 

Reclassification of warrants from liability to equity

 

 

 

 

 

 

 

 

6,550

 

 

 

 

 

 

 

 

 

 

 

 

6,550

 

Conversion of convertible debt

 

 

6,161,331

 

 

 

6

 

 

 

38,848

 

 

 

 

 

 

 

 

 

 

 

 

38,854

 

Issuance of common stock under ESPP

 

 

34,176

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

 

 

 

32

 

RSU settlements, net of shares withheld

 

 

49,330

 

 

 

 

 

 

(128

)

 

 

 

 

 

 

 

 

 

 

 

(128

)

Issuance of common stock for services

 

 

5,772

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

 

 

 

62

 

Issuance of common stock for cash upon

   exercise of stock options

 

 

142,554

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

 

 

 

80

 

Issuance of common stock for cash upon

   exercise of warrants

 

 

22,600

 

 

 

 

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

153

 

Share-based compensation expense

 

 

 

 

 

 

 

 

634

 

 

 

 

 

 

 

 

 

 

 

 

634

 

Acquisition of noncontrolling interests

 

 

 

 

 

 

 

 

(537

)

 

 

 

 

 

 

 

 

(155

)

 

 

(692

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(137

)

 

 

 

 

 

 

 

 

(137

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,969

)

 

 

(25

)

 

 

(8,994

)

Balance at March 31, 2018

 

 

35,240,782

 

 

$

35

 

 

$

309,898

 

 

$

(2,483

)

 

$

(274,058

)

 

$

 

 

$

33,392

 

RSU settlements, net of shares withheld

 

 

24,306

 

 

 

 

 

 

(570

)

 

 

 

 

 

 

 

 

 

 

 

(570

)

Issuance of common stock for services

 

 

12,147

 

 

 

 

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

72

 

Issuance of common stock for cash upon

   exercise of stock options

 

 

24,934

 

 

 

 

 

 

98

 

 

 

 

 

 

 

 

 

 

 

 

98

 

Issuance of common stock for cash upon

   exercise of warrants

 

 

445,576

 

 

 

 

 

 

5,724

 

 

 

 

 

 

 

 

 

 

 

 

5,724

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,449

 

 

 

 

 

 

 

 

 

 

 

 

2,449

 

Issuance of common stock for contingent consideration

 

 

227,848

 

 

 

1

 

 

 

2,689

 

 

 

 

 

 

 

 

 

 

 

 

2,690

 

Issuance of warrants in connection with Perceptive debt

 

 

 

 

 

 

 

 

784

 

 

 

 

 

 

 

 

 

 

 

 

784

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(1,625

)

 

 

 

 

 

 

 

 

(1,625

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,062

)

 

 

 

 

 

(14,062

)

Balance at June 30, 2018

 

 

35,975,593

 

 

$

36

 

 

$

321,144

 

 

$

(4,108

)

 

$

(288,120

)

 

$

 

 

$

28,952

 

 

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

 

7


 

CareDx, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(15,378

)

 

$

(23,056

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

11,045

 

 

 

3,217

 

Revaluation of common stock warrant liability and derivative liability to estimated fair value

 

 

4,360

 

 

 

7,447

 

Depreciation and amortization

 

 

2,380

 

 

 

2,025

 

Loss on the write-off of fixed assets

 

 

150

 

 

 

 

 

Non-cash lease expense

 

 

201

 

 

 

 

Amortization of inventory fair market value adjustment

 

 

 

 

 

189

 

Loss on conversion of JGB Debt to shares of common stock

 

 

 

 

 

2,806

 

Amortization of debt discount and noncash interest expense

 

 

 

 

 

2,132

 

Revaluation of contingent consideration to estimated fair value

 

 

 

 

 

1,017

 

Changes in operating assets and liabilities: