CDNA CareDx, Inc 10-K 2025-12-31 section summaries

CareDx — Business

Business model and strategy

CareDx provides transplant-focused precision-medicine solutions, including molecular diagnostic testing, laboratory products, digital tools, patient support, and specialty pharmacy services. It operates as one reportable segment. In FY2025, it performed approximately 200,000 commercial tests at its Brisbane, California laboratory; its software was used in more than 170 U.S. transplant centers. Substantially all revenue came from the United States and Europe, while substantially all assets and operations were in the United States and Sweden.

The company’s strategy is to sell complementary products and services through a coordinated commercial model, using cross-selling and transplant-center workflow insights to expand adoption, improve customer loyalty, and lower acquisition costs. Its priorities are profitable growth, operational excellence, expanding the TRANSPLANT+ market into adjacent areas, and strengthening performance culture. Growth efforts include improving patient acquisition and testing adherence, developing clinical evidence to support reimbursement and revenue per test, and advancing new products. The company also plans investments in automation, AI, enterprise systems, data security, and privacy.

CareDx describes the LDT molecular-diagnostics market as difficult to scale profitably: adoption can be selective, switching providers is relatively easy, and substantial R&D and customer-acquisition costs challenge profitability. Results therefore depend in part on clinical acceptance, payer coverage and reimbursement, adoption across a concentrated base of transplant centers, and the ability to control acquisition costs.

Products, evidence, and operations

Core post-transplant tests include AlloSure Kidney, Heart, and Lung, which measure donor-derived cell-free DNA (dd-cfDNA), and AlloMap Heart, a gene-expression test. These non-invasive tests are positioned as indicators of injury or rejection that may precede conventional functional measures and can help clinicians assess risk and manage immunosuppression. HeartCare combines AlloMap and AlloSure Heart; in 2025, its indication expanded to pediatric patients of all ages, including newborns. A 2025 SHORE analysis found patients with both tests positive were approximately 6x more likely to have biopsy-confirmed acute cellular rejection and 2x more likely to experience poor outcomes than patients with both tests negative. SHORE has followed more than 2,700 patients at 67 U.S. transplant centers since 2018.

AlloSure Kidney provides continuous dd-cfDNA results and can help identify certain forms of microvascular inflammation, including in some DSA-negative, C4d-negative cases associated with graft-failure risk. AlloSure Plus combines dd-cfDNA analysis with clinical inputs using AI. Other development and partnership opportunities include HistoMap Kidney, AlloHeme for monitoring AML and MDS relapse after stem-cell transplant, and AlloCell for monitoring allogeneic cell-therapy engraftment and persistence.

Laboratory products include HLA-typing and transplant-monitoring kits. QTYPE returns HLA-typing results in about one hour, versus 2–3 hours for SSP and 5–7 hours for SSO methods. AlloSeq products support HLA typing, transplant-injury and rejection surveillance, and stem-cell-transplant chimerism testing. CareDx’s Brisbane laboratory is CLIA-certified and CAP-accredited; results are typically reported within two business days of sample receipt, though quality-control retesting can extend turnaround. Management believes current capacity can meet demand for the next few years. The Stockholm facility manufactures and packages products under applicable quality systems; manufacturing of AlloSeq products is being migrated from Australia to the United States and Europe.

Digital and patient offerings include transplant workflow and EMR tools, referrals, quality reporting and waitlist support, medication adherence, remote monitoring, and specialty pharmacy services. In 2025, CareDx launched IOTA, an enhanced XynQAPI module that projects transplant-center performance under updated Increasing Organ Transplant Access criteria.

Reimbursement and market exposure

Medicare-covered patients and Medicare’s share of testing-services revenue declined over the last three years, but Medicare remains a material source of revenue.

Effective January 1, 2026, Medicare rates are $2,753 for AlloSure Kidney, Heart, and Lung; $3,240 for AlloMap Heart; and $5,993 for HeartCare. AlloSure Kidney’s rate declined $88 following a CMS code cross-walk; Heart and Lung pricing was unchanged. A proposed 2025 MolDX/Noridian local coverage determination could add coverage criteria and utilization limits and introduce bundled payments for certain surveillance tests, potentially reducing reimbursement. The MACs have up to 365 days from July 17, 2025 to finalize it; the outcome remains uncertain. Private coverage varies by test and payer, and CareDx seeks case-by-case reimbursement and appeals denials when tests fall outside payer policies.

Competition, supply, and intellectual property

Competitors include molecular-testing companies such as Natera, Eurofins Transplant Genomics, Devyser, and iMDx; established biopsy and routine testing, hospital laboratories, and in-house tests are alternatives. HLA products compete with providers including Thermo Fisher’s One Lambda, Omixon, GenDx, BAG, Qiagen, and Immucor. Digital products compete with Epic’s Phoenix, T-REX, MedSleuth, and hospital or specialty pharmacies. CareDx identifies clinical evidence, reimbursement, diagnostic confidence, cost-effectiveness, innovation, and ease of use as important competitive factors.

The Brisbane laboratory depends on sole-source suppliers for certain instruments, reagents, and consumables. Strict quality and regulatory requirements may make rapid supplier replacement difficult and could threaten timely, cost-competitive production. As of December 31, 2025, CareDx held seven U.S. patents related to transplant rejection and autoimmune disease, expiring August 2027–May 2035, and four related to organ-function recovery and allograft preservation, expiring July 2038–June 2041. Four of the seven rejection/autoimmunity patents are exclusively licensed. The company also relies on trade secrets and third-party rights, including Illumina’s worldwide NGS product-line rights and Cornell’s exclusive rights to four U.S. patents covering urine gene-expression methods for diagnosing kidney-transplant rejection.

Regulation, workforce, and other risks

CareDx’s laboratory services are subject to CLIA and state licensing requirements. In April 2025, a federal district court vacated the FDA’s 2024 LDT rule; the FDA issued a final rule in September 2025 reverting the relevant regulation to its pre-change text. Future changes in law, interpretation, or enforcement could still affect the business. CareDx also faces healthcare compliance obligations involving privacy, referrals, anti-kickback rules, billing, and information blocking; violations could result in fines, criminal penalties, exclusion from federal programs, or added costs. European products are transitioning from IVDD to IVDR requirements, with certification and quality-system updates in progress; the company anticipated no supply risk during the transition. GDPR and UK GDPR penalties can reach €20 million (£17.5 million in the UK) or 4% of prior-year worldwide turnover, whichever is greater.

At December 31, 2025, CareDx had 765 employees, including 761 full-time: 145 in manufacturing operations and support, 186 in R&D, 252 in sales and marketing, and 182 in G&A. There were 706 employees in the United States and 59 abroad. The Swedish SSP production group is covered by a collective bargaining agreement; other employees are not union-represented. CareDx reports good employee relations and no work stoppages, while noting potential labor disputes as a risk. Its operations also use hazardous, including biological, materials and are subject to environmental, health, and safety requirements; contamination, exposure, or noncompliance could result in damages, fines, or higher costs.

CDNA — Item 1A: Risk Factors

Financial position and funding

Revenue grew 14%, but CareDx cautions that growth may not continue and could stagnate or decline. It expects net losses for several years as it invests in research and development, clinical validation, commercialization, laboratory capacity, personnel, acquisitions, litigation, and regulatory compliance. Its accumulated deficit was $735.4 million at December 31, 2025. Cash, cash equivalents and marketable securities totaled $201.4 million. Rising expenditures may require additional financing; equity could dilute shareholders, debt could add senior claims and restrictions, and other funding arrangements could require surrendering valuable rights. If adequate financing is unavailable, CareDx may need to curtail operations or development.

Reimbursement, adoption and commercialization

Medicare reimbursement is a major concentration: Medicare represented 46% of FY2025 testing-services revenue for AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung. The January 1, 2026 CMS Clinical Laboratory Fee Schedule rate for AlloSure (PLA 0540U, cross-walked to CPT 0493U) is approximately $2,753—$88 below the prior rate for AlloSure Kidney and unchanged for AlloSure Heart and AlloSure Lung. A February 2026 PAMA amendment requires reporting private-payer rates from January–June 2025 during May–July 2026; resulting median rates will inform CLFS rates for certain tests in 2027–2029. CareDx does not expect a material effect from this reporting, but future reimbursement is uncertain.

A proposed July 17, 2025 MolDX/Noridian LCD revision could add coverage criteria, utilization limits or bundled payment for certain tests; a final determination is due within 365 days. CareDx is also disputing a significant Medicare Advantage payer’s denials, underpayments and recoupments. More broadly, coverage changes, audits, payer denials, inadequate private-payer rates and negative technology assessments could reduce reimbursement or utilization. The company’s revenue is expected to remain substantially dependent on its named transplant tests and products for at least the next two years.

Growth depends on clinical evidence and utility, clinician and transplant-center adoption, reimbursement, pricing, and successful development and commercialization of additional products. Clinical studies may fail or require repetition; sample and data access can be limited, and adoption may be slow. Biopsy remains an established, reimbursed approach for kidney and heart monitoring; echocardiography and spirometry are also established alternatives in heart and lung care. Competitors—including Natera, Eurofins, iMDx and Verici in transplant diagnostics—may offer lower-priced or simpler alternatives. These factors can limit adoption, pressure prices and margins, or delay commercialization.

Operating capacity, supply and execution

All U.S. testing is conducted at the Brisbane, California laboratory, with no redundant facility; it is near earthquake fault lines and has no earthquake insurance. An outage could halt testing, and establishing replacement capacity would take time and require significant investment, certification and licensing. Growth also requires reliable quality systems, equipment, staff and service capacity. CareDx depends on third-party laboratories, expedited shipping and sole-source suppliers for certain instruments, reagents and consumables, including Thermo Fisher, Roche, Illumina, BD, Streck, Beckman Coulter and Qiagen. Disruptions could delay testing or interrupt sales. The 2023 FDA approval of an updated AlloMap using Roche real-time PCR provides an alternative to the ABI 7900 platform.

The company also faces competition for qualified laboratory, scientific and commercial staff; product errors or inaccurate results could prompt claims, corrective action or suspension of testing. Its Sweden production group is covered by an IF Metall collective bargaining agreement; a work stoppage could disrupt production, packaging and labeling of several products. International expansion depends on partners and entails reimbursement, regulatory, logistics, currency, sanctions and trade-policy risks.

Regulatory, legal and intellectual-property risks

The regulatory status of laboratory-developed tests remains uncertain. A September 2025 FDA rule restored prior regulatory text limiting FDA authority over CareDx’s testing services, following a federal court decision; future policy may change. If FDA or Congress requires device regulation, CareDx could face additional studies, clinical trials and PMA approval or 510(k) clearance, delaying or restricting products and increasing costs. CLIA accreditation and state laboratory licenses are essential to conducting testing.

Healthcare fraud-and-abuse laws carry risks of repayment, exclusion, treble damages and per-claim penalties; for violations assessed after July 3, 2025, federal False Claims Act penalties are $14,308–$28,619 per claim. In one UPIC review, CareDx received notice of $38,975.02 in Medicare overpayments; a separate 2025 UPIC review identified no overpayment. A DOJ civil investigative demand concerning kidney-testing and phlebotomy practices remains a risk, although a related SEC investigation concluded in September 2023 with no intended enforcement recommendation against CareDx.

As of December 31, 2025, CareDx held seven U.S. patents concerning transplant rejection and autoimmune-disease diagnosis, expiring August 2027–May 2035, and four concerning organ-function recovery and allograft preservation, expiring July 2038–June 2041. Patent challenges, infringement claims, or loss of licensed technology could require costly litigation, royalties, redesign or cessation of sales. A 2021 court found three patents asserted against Natera invalid, potentially limiting CareDx’s ability to block similar products. CareDx also depends on third-party licenses, including Illumina; failure to meet commercialization milestones could cost exclusivity, and future-product royalties are in the mid-single- to low-double-digit range.

Data, capital allocation and governance

Cyberattacks, system failures or privacy-law violations could expose sensitive health information or disrupt testing, billing, research and reporting. CareDx faces a growing patchwork of U.S. and international privacy requirements; GDPR penalties can reach the greater of €20 million (£17.5 million in the UK) or 4% of global annual revenue.

CareDx repurchased 5.8 million shares for $87.8 million in FY2025 under two programs. At year-end, $12.2 million remained under the May 2025 program. Repurchases, subject to a 1% federal excise tax on the fair market value of net repurchases, reduce funds available for operations and investment. The stock ranged from $11.57 to $25.07 per share in 2025; the company pays no cash dividend and identifies risks from market volatility, short-seller allegations and loss of analyst coverage.

Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2025. A 2024 material weakness involving multiple COSO components caused immaterial corrected errors in stock-based compensation reporting and was remediated in 2025; continued investment and oversight are expected. Future control failures could still lead to inaccurate or late reporting, restatements, sanctions or reduced access to capital. Takeover provisions, concentrated shareholder influence, and public-company compliance costs may also constrain shareholder influence or divert management resources.

Cybersecurity Risk Management and Oversight

CDNA integrates cybersecurity into its enterprise risk-management program. Its controls are informed by SOC 2 Type 2 criteria, periodic assessments using the NIST Cybersecurity Framework, and other applicable standards. Management conducts quarterly assessments and testing, and results are reviewed and reported to the Board’s Audit and Finance Committee quarterly. The company adjusts its policies and practices as needed.

Key controls include cross-functional processes to identify and escalate incidents; firewalls and intrusion detection and prevention; anti-malware and access controls; routine vulnerability assessments and threat intelligence; annual incident-response and business-continuity tabletop exercises; risk-based oversight of third parties; and mandatory quarterly employee training. CDNA recognizes third-party systems as a potential source of material cybersecurity risk.

The Board and its Audit and Finance Committee receive regular cybersecurity updates and are promptly notified of risks that meet reporting thresholds. The CTO coordinates implementation with senior management and cross-functional teams and has more than 25 years of IT and information-security experience. The Board and committee discuss cybersecurity oversight annually with the CTO and senior management.

CDNA states that cybersecurity threats, including prior incidents, have not materially affected and are not reasonably likely to materially affect its business strategy, results of operations, or financial condition, except as described in the cited Risk Factors disclosure. For this assessment, the company defines materiality as an adverse impact to critical information that could create significant legal or financial exposure.

CareDx FY2025 — business and financial summary

CareDx provides transplant-focused molecular testing, laboratory products, pharmacy services and digital patient-management solutions. Testing revenue is driven by samples processed and results reported, but depends on payer coverage and collections. In FY2025, testing volume grew faster than testing revenue, reflecting increased refunds reserves and lower collections for tests performed in prior periods. Growth initiatives include expanding pharmacy and software adoption, commercial NGS-based kits and additional transplant services supported by clinical studies.

FY2025 results

Revenue increased 14%. Testing-services revenue rose 10%, while test volume increased approximately 14% to 200,000. The difference was partly attributable to a $3.5 million increase in the third-party-payer refunds reserve and $7.8 million less revenue collected under ASC 606 for tests performed in prior periods. Product revenue grew 19%, supported by commercial NGS-based kit sales and targeted-customer conversions. Patient and digital solutions revenue increased 31%, primarily from pharmacy sales and growth in digital solutions, including an expanded Ottr customer base.

Cost of testing services increased with volume, partly offset by laboratory efficiencies. Product cost declined, while patient and digital solutions cost rose largely with pharmacy sales. Lower clinical-trial, consulting/licensing and stock-compensation costs largely offset higher personnel and software costs in R&D. Sales and marketing increased mainly due to personnel and marketing spending. G&A declined primarily because stock-based compensation expense was $25.7 million lower, partly offset by higher software, personnel and impairment costs.

Litigation expense in FY2025 included settlement of a securities class action. FY2024 included a litigation credit following a favorable ruling that Natera’s asserted patents were invalid. The resulting year-over-year swing, together with higher sales and marketing spending, contributed to the change from operating income to an operating loss. FY2025 recorded $0.271 million of tax expense despite a pretax loss.

Cash flow, liquidity and capital allocation

FY2025 operating cash flow included $34.9 million of stock-based compensation and $15.0 million of depreciation and amortization; net operating assets increased $3.8 million. By contrast, FY2024 operating cash flow benefited from a $102.3 million decrease in net operating assets. Investing cash flow included $154.7 million of marketable-security maturities and $145.9 million of purchases. Financing cash outflow was primarily related to share repurchases.

At December 31, 2025, CareDx held $201.4 million in cash, cash equivalents and marketable securities and had no debt. Management expects available cash and operating cash flows, including existing and potential license and collaboration proceeds, to cover anticipated requirements for the next 12 months. The company has a history of significant losses and negative operating cash flows; accumulated deficit was $735.4 million.

FY2025 repurchases totaled 5.8 million shares for $87.8 million, averaging $15.16 per share. The company used the February 2025 $50 million authorization in full; $12.2 million remained at year-end under a subsequent May 2025 authorization of up to $50 million. Q4 repurchases were 773,000 shares for $12 million, averaging $15.79 per share. A shelf registration permits offerings of up to $250 million of securities.

Q4 FY2025 and operating trends

Q4 revenue was $108 million, up 25% year over year. Testing-services revenue was $78 million, up 23%, on approximately 53,000 tests, up 17%; patient and digital solutions revenue was $16.8 million, up 47%; and product revenue was $13.3 million, up 17%. Average revenue per test was approximately $1,480, including about $5 million of prior-period revenue. Q4 net loss was $4 million, compared with net income of $88 million in Q4 FY2024; Q4 operating cash flow was $21.4 million.

Revenue estimates, impairment and risks

Testing revenue is recognized when test results are delivered, but the amount depends on payer coverage and collection experience. Estimates for non-contracted and self-pay payers rely on historical reimbursement and collection information; management reviews assumptions quarterly against collections, payer discussions and rate changes, and assesses whether substantially all expected consideration is probable of collection. The $3.5 million FY2025 reduction from the estimated refunds reserve highlights exposure to payer refunds and revenue-estimation judgments. Product revenue is generally recognized at shipment or delivery. Patient and digital revenue includes SaaS subscriptions recognized over the subscription term, licenses recognized when available, and medication sales recognized upon shipment or delivery; some license arrangements include advance milestone payments and deferred revenue.

Other significant judgments include stock-option valuation assumptions and forfeitures, acquisition-date fair values of intangible assets and contingent consideration, and periodic remeasurement of liability-classified contingent consideration through operating expenses. The December 1, 2025 qualitative goodwill assessment considered earnings, market conditions and market capitalization and concluded reporting-unit fair value was more likely than not above carrying value; no quantitative test or goodwill impairment was identified as of December 31, 2025. No impairment was identified for acquired in-process technology. Indefinite-lived acquired technology may become amortizable once development is complete, generally after regulatory approval or commercial availability.

Key business risks include dependence on testing volume, reimbursement and collections; quarterly variability in clinical-study and R&D spending; and the need to sustain pharmacy and digital-software adoption and develop new products and services. Foreign operations in Sweden and Australia also expose CareDx to potential regulatory, export-duty and foreign-exchange impacts.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

At December 31, 2025, CDNA held $201.4 million in cash, cash equivalents and marketable securities, including bank deposits, money-market funds, corporate debt securities and U.S. government securities. Management does not consider interest-rate risk material. A hypothetical 100-basis-point increase or decrease in interest rates would have had an approximate $2.0 million impact on the consolidated balance sheets.

Foreign-currency exposure

Foreign-exchange risk arises from Swedish operations, international sales, foreign-currency transactions, and foreign-denominated assets, liabilities and expenses. Testing and patient and digital solutions revenue are primarily denominated in U.S. dollars; product revenue is primarily denominated in U.S. dollars and euros. Some operating expenses are denominated in Swedish kronor, Australian dollars and euros.

CDNA has no near-term plans to establish a formal hedging program, but expects to reassess its approach as its foreign-currency exposure changes.

CareDx, Inc. — FY2025

CareDx provides transplant-focused molecular testing, laboratory products, digital health technologies and patient solutions. It reported one operating and reportable segment; management allocates resources across its business lines to optimize consolidated results.

Consolidated results

Revenue grew 13.8% in FY2025, compared with 19.1% in FY2024. Patient and digital solutions was the fastest-growing category, up 30.5% after 17.5% growth in FY2024; testing-services growth slowed to 10.1% from 18.9%, and product growth to 18.6% from 21.7%. The earnings swing chiefly reflects litigation: FY2025 included $5.710 million of settlement expense, versus a $96.300 million litigation settlement benefit in FY2024 and $96.300 million expense in FY2023. Personnel expense rose to $131.276 million from $116.251 million, while stock-based compensation fell to $34.864 million from $66.406 million. FY2025 also included $2.824 million of transformational-initiative costs.

Cash flow and liquidity

Cash, cash equivalents and restricted cash declined $49.294 million during FY2025; financing outflow included the share repurchases. Cash and equivalents were $65.429 million at year-end, including $0.551 million of restricted cash. Held-to-maturity securities had fair value of $136.596 million, versus $148.330 million in FY2024; no other-than-temporary impairments were recorded. The balance sheet presents no debt line.

Balance sheet and assets

Derived tangible common equity—equity less goodwill and other intangible assets—was $230.805 million, down from $299.913 million. Net intangible assets at FY2025 year-end comprised acquired/developed technology $10.187 million; customer relationships $11.529 million; commercialization rights $4.557 million; trademarks/tradenames $2.194 million; acquired in-process technology $1.250 million; and a favorable license agreement $2.243 million. A $1.7 million intangible asset was impaired and written off to G&A. Goodwill was not impaired; a qualitative assessment concluded reporting-unit fair value more likely than not exceeded carrying value.

Share repurchases, awards and taxes

Common shares outstanding declined from 54,771,203 at the start of FY2025 to 50,916,644 at year-end. Repurchases totaled 5.8 million shares for $87.8 million: $50.0 million under the February authorization and $37.8 million under the May program, leaving $12.2 million available. Potentially issuable shares totaled 10.140456 million at year-end, including 2.478871 million options, 3.930939 million RSUs and PSUs, 3.188940 million plan-reserve shares and 0.541706 million ESPP shares. Outstanding RSUs had approximately $68.9 million of intrinsic value. Stock-based compensation expense fell from $66.406 million to $34.864 million; no employee stock options were granted in FY2025.

FY2025 pretax loss was $21.083 million and income tax expense was $0.271 million. A full valuation allowance of $92.636 million was maintained against U.S. and Swedish net deferred tax assets. Federal, state and foreign NOL carryforwards were $130.8 million, $6.2 million and $29.3 million, respectively. Unrecognized tax benefits increased to $13.479 million from $8.641 million.

Revenue estimates, litigation and risks

Medicare contributed 34% of FY2025 revenue, down from 38% in FY2024 and 40% in FY2023; no other payer exceeded 10%. Testing-services revenue included $9.6 million recognized for tests performed in prior periods, versus $17.4 million in FY2024, and a $3.5 million estimated-refund reserve reduced revenue. Reimbursement estimates rely on payer coverage, historical collections and collection rates, and are updated quarterly. Deloitte identified estimating transaction prices for non-Medicare testing-services revenue as a critical audit matter. The auditor issued unqualified opinions on the financial statements and internal controls.

CareDx paid approximately $20.25 million to resolve the securities class action after final approval in December 2025. A $44.9 million jury award to CareDx in its false-advertising case against Natera has not been recorded as a receivable or gain; CareDx petitioned the Supreme Court for review in February 2026. In separate patent litigation, a $96.3 million award against CareDx was reversed after the asserted patents were found invalid; Natera appealed, leaving potential exposure of up to $96.3 million plus interest. Derivative-action settlements remain subject to court approval, and no liability was recorded. The SEC closed its investigation without intending to recommend enforcement; a former employee’s private qui tam action remains pending.

Rule 10b5-1 Trading Plans

During the three months ended December 31, 2025, CEO John W. Hanna adopted a Rule 10b5-1 trading plan on December 12, 2025, covering sales of up to 242,434 shares of common stock. The plan ends when all shares are sold or on March 26, 2027, whichever occurs first, subject to specified early-termination events.

Board member Hannah Valantine adopted a Rule 10b5-1 trading plan on December 11, 2025, covering sales of up to 40,882 shares. It ends when all shares are sold or on December 31, 2026, whichever occurs first, subject to specified early-termination events.

No other directors or officers adopted or terminated a Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangement during the quarter. This section reports no financial results or other business developments.