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Table of Contents

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 September 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)
__________________________________________________
Delaware94-3316839
(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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.001 per shareCDNAThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 42,436,026 shares of the registrant’s Common Stock issued and outstanding as of October 29, 2019.



Table of Contents
CareDx, Inc.
TABLE OF CONTENTS
Page No.

2

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CareDx, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
September 30, 2019December 31, 2018
Assets
Current assets:
Cash and cash equivalents$40,927  $64,616  
Accounts receivable19,169  9,760  
Inventory5,902  4,943  
Prepaid and other current assets2,126  1,795  
Total current assets68,124  81,114  
Property and equipment, net3,656  4,134  
Operating leases right-of-use assets2,244    
Intangible assets, net45,781  33,252  
Goodwill23,777  12,005  
Restricted cash251  192  
Other assets1,000    
Total assets144,833  130,697  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$5,691  $4,711  
Accrued compensation10,278  9,156  
Accrued and other liabilities15,002  5,637  
Total current liabilities30,971  19,504  
Deferred tax liability2,013  2,968  
Common stock warrant liability6,940  10,003  
Deferred payments for intangible assets5,103    
Other liabilities2,263  2,294  
Total liabilities47,290  34,769  
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000,000 shares authorized at September 30, 2019 and December 31, 2018; no shares issued and outstanding at September 30, 2019 and December 31, 2018
    
Common stock: $0.001 par value; 100,000,000 shares authorized at September 30, 2019 and December 31, 2018; 42,421,115 shares and 41,384,960 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
42  41  
Additional paid-in capital432,471  412,010  
Accumulated other comprehensive loss(5,934) (4,278) 
Accumulated deficit(329,036) (311,845) 
Total stockholders' equity97,543  95,928  
Total liabilities and stockholders’ equity$144,833  $130,697  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
Revenue:
Testing services revenue$28,226  $16,847  $75,421  $41,448  
Product revenue4,200  4,223  13,226  11,080  
Digital and other revenue1,385  114  2,600  532  
Total revenue33,811  21,184  91,247  53,060  
Cost of revenue11,494  8,887  32,739  22,478  
Gross profit22,317  12,297  58,508  30,582  
Operating expenses:
Research and development8,521  3,868  21,765  10,732  
Sales and marketing11,058  5,971  28,627  15,916  
General and administrative9,485  5,177  27,103  16,080  
Change in estimated fair value of contingent consideration      1,017  
Total operating expenses29,064  15,016  77,495  43,745  
Loss from operations(6,747) (2,719) (18,987) (13,163) 
Other income (expense):
Interest income (expense), net37  (408) 679  (3,527) 
Debt extinguishment expenses      (2,806) 
Change in estimated fair value of common stock warrant liability and derivative liability4,346  (17,093) (14) (24,540) 
Other expense, net(398) (40) (644) (85) 
Total other income (expense)3,985  (17,541) 21  (30,958) 
Loss before income taxes(2,762) (20,260) (18,966) (44,121) 
Income tax benefit949  290  1,775  1,095  
Net loss(1,813) (19,970) (17,191) (43,026) 
Net loss attributable to noncontrolling interest      (25) 
Net loss attributable to CareDx, Inc.$(1,813) $(19,970) $(17,191) $(43,001) 
Net loss per share attributable to CareDx, Inc. (Note 3):
Basic$(0.04) $(0.54) $(0.41) $(1.26) 
Diluted$(0.04) $(0.54) $(0.41) $(1.26) 
Weighted-average shares used to compute net loss per share attributable to CareDx, Inc.:
Basic42,393,550  37,154,293  42,048,647  34,134,138  
Diluted42,393,550  37,154,293  42,048,647  34,134,138  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
Net loss$(1,813) $(19,970) $(17,191) $(43,026) 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax(863) 120  (1,656) (1,642) 
Net comprehensive loss(2,676) (19,850) (18,847) (44,668) 
Comprehensive loss attributable to noncontrolling interest, net of tax      (25) 
Comprehensive loss attributable to CareDx, Inc.$(2,676) $(19,850) $(18,847) $(44,643) 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 201841,384,960  $41  $412,010  $(4,278) $(311,845) $95,928  
Issuance of common stock under ESPP31,184  —  341  —  —  341  
RSU settlements, net of shares withheld146,159  —  (2,378) —  —  (2,378) 
Issuance of common stock for services2,112  —  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, 201941,912,469  $41  $419,959  $(5,002) $(319,376) $95,622  
Changes in estimated offering costs—  —  50  —  —  50  
RSU settlements, net of shares withheld112,760  —  (1,597) —  —  (1,597) 
Issuance of common stock for services1,663  —  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, 201942,306,432  $42  $425,418  $(5,071) $(327,223) $93,166  
Contingent consideration classified as equity—  —  222  —  —  222  
Issuance of common stock under ESPP20,528  —  418  —  —  418  
RSU settlements, net of shares withheld2,140  —  (29) —  —  (29) 
Issuance of common stock for services1,514  —  54  —  —  54  
Issuance of common stock for cash upon exercise of stock options81,473  —  476  —  —  476  
Issuance of common stock upon exercise of warrants9,028  —  —  —  —  —  
Share-based compensation expense—  —  5,912  —  —  5,912  
Foreign currency translation adjustment—  —  —  (863) —  (863) 
Net loss—  —  —  —  (1,813) (1,813) 
Balance at September 30, 201942,421,115  $42  $432,471  $(5,934) $(329,036) $97,543  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Stock and Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Noncontrolling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance at December 31, 201728,825,019  $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 debt6,161,331  6  38,848  —  —  —  38,854  
Issuance of common stock under ESPP34,176  —  32  —  —  —  32  
RSU settlements, net of shares withheld49,330  —  (128) —  —  —  (128) 
Issuance of common stock for services5,772  —  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, 201835,240,782  $35  $309,898  $(2,483) $(274,058) $  $33,392  
RSU settlements, net of shares withheld24,306  —  (570) —  —  —  (570) 
Issuance of common stock for services12,147  —  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 consideration227,848  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, 201835,975,593  $36  $321,144  $(4,108) $(288,120) $  $28,952  
Issuance of common stock under ESPP42,534  —  255  —  —  —  255  
RSU settlements, net of shares withheld104,014  —  —  —  —  —  —  
Issuance of common stock for services29,890  —  63  —  —  —  63  
Issuance of common stock for cash upon exercise of stock options115,144  —  411  —  —  —  411  
Issuance of common stock for cash upon exercise of warrants2,517,036  3  32,770  —  —  —  32,773  
Share-based compensation expense—  —  1,202  —  —  —  1,202  
Issuance of common stock for contingent consideration—  —  582  —  —  —  582  
Foreign currency translation adjustment—  —  —  120  —  —  120  
Net loss—  —  —  —  (19,970) —  (19,970) 
Balance at September 30, 201838,784,211  $39  $356,427  $(3,988) $(308,090) $  $44,388  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CareDx, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended September 30,
20192018
Operating activities:
Net loss$(17,191) $(43,026) 
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation17,010  5,078  
Revaluation of common stock warrant liability and derivative liability to estimated fair value14  24,540  
Depreciation and amortization3,840  3,039  
Loss on the write-off of fixed assets160    
Non-cash lease expense1,129    
Amortization of inventory fair market value adjustment  224  
Loss on conversion of JGB Debt to shares of common stock  2,806  
Amortization of debt discount and noncash interest expense  2,188  
Revaluation of contingent consideration to estimated fair value  1,017  
Changes in operating assets and liabilities:
Accounts receivable(7,816) (3,830) 
Inventory(1,327) 358  
Prepaid and other assets566  (174) 
Operating leases liabilities, net(1,436) —  
Accounts payable1,003  (863) 
Accrued compensation1,038  3,376  
Accrued and other liabilities2,478  430  
Change in deferred taxes(1,154) (1,168) 
Net cash used in operating activities(1,686) (