CDNA CareDx, Inc 10-Q 2026-06-30 section summaries

CareDx (CDNA) — Q2 and H1 2026

Revenue, costs and earnings

Revenue increased 52.2% in Q2 and 45.7% in H1. Testing services drove growth, rising 61.1% in Q2 and 54.4% in H1; patient and digital solutions rose 50.1% and 42.1%, respectively, while product growth was more modest at 8.1% in Q2 and 2.2% in H1. The company reports one operating segment, evaluated by the chief operating decision maker using net income.

Reported operating results included a $112.966M gain on the June 30 sale of the lab-products business. Excluding that gain, operating income was approximately $0.257M in Q2 and $1.455M in H1. The sale generated approximately $171.7M cash consideration, subject to post-close adjustments; net cash proceeds reported in investing activities were $164.792M. The gain was net of approximately $4.8M transaction costs and included derecognition of $4.4M goodwill. CareDx treated the business as continuing operations, concluding the transaction was not a strategic shift qualifying for discontinued-operations presentation.

Basic/diluted EPS was $2.15/$2.07 in Q2 and $2.21/$2.13 in H1, versus losses per share of $0.16 and $0.35 in the respective 2025 periods. Weighted-average diluted shares were 53.423M in Q2 and 53.320M in H1. H1 stock-based compensation was $20.457M, up from $18.355M; outstanding awards included 2,297,750 options and 3,751,020 RSUs/PSUs at June 30.

Cash flow and liquidity

Investing cash flow included the lab-sale proceeds and $114.636M of marketable-security sales. Cash and cash equivalents rose to $373.636M at June 30, 2026, from $65.429M at December 31, 2025; marketable securities fell from $135.944M to zero. CareDx repurchased 569,569 shares in Q2; H1 repurchases totaled 0.6M shares for $12.2M. A new $100M repurchase program was authorized in April 2026, with no purchases through June 30.

Common shares outstanding increased from 50,916,644 at the start of H1 to 51,482,536 at June 30; equity-plan issuances and RSU settlements more than offset repurchases.

Balance sheet

June 30 net intangible assets comprised acquired/developed technology $2.519M; customer relationships $7.222M; commercialization rights $3.925M; trademarks/tradenames $1.397M; acquired in-process technology $1.250M; and a favorable license agreement $2.243M. Goodwill and intangible assets declined primarily because of the lab-products divestiture; no impairment indicators were identified for retained balances. Derived tangible common equity was $371.074M, compared with $230.805M at year-end. Inventory fell to $6.982M from $26.705M, while the refunds reserve rose to $9.531M from $3.500M.

Business, risks and subsequent events

Medicare represented 30% of Q2 revenue versus 34% in Q2 2025, and 29% of H1 revenue versus 36% in H1 2025. It was 21% of accounts receivable at both June 30, 2026 and December 31, 2025. Testing-services revenue estimates include adjustments for tests performed in earlier periods: Q2/H1 2026 included $18.0M/$35.6M of such revenue, while refunds-reserve increases reduced revenue by $2.4M/$5.8M.

Natera litigation remains a material uncertainty. CareDx had previously recorded approximately $96.3M for a jury award, but the court overturned the verdict and denied an injunction; the liability was derecognized, though a potential loss of up to $96.3M plus interest remains possible if Natera prevails on appeal. Separately, CareDx’s $44.9M false-advertising jury award against Natera was affirmed on appeal, but no receivable or gain was recorded because it was not realized.

On July 1, 2026, CareDx completed its acquisition of Naveris for $161.8M cash, subject to customary adjustments, with up to $100.0M additional cash tied to FY2026 and FY2027 revenue milestones. Purchase-price allocation was still incomplete when the financial statements were issued.

CDNA — Q2 and H1 2026 results

CDNA’s Q2 revenue increased 52% year over year, driven primarily by testing services and patient and digital solutions. H1 revenue grew 46%. Reported profitability, however, was largely shaped by the June 30 sale of the lab-products business, which produced a $112.966M gain recorded as a reduction of operating expenses.

Consolidated results

The unusually low Q2 operating expenses reflect the sale gain; they do not represent a comparable reduction in underlying operating costs. H1 income tax expense was $3.850M, versus a $0.059M benefit in H1 2025, including $3.8M of current tax expense related to the sale gain. Litigation settlement expense was $0.600M in H1 2026, compared with $5.710M in H1 2025.

Revenue by category

Testing-services revenue grew 61% in Q2 and 54% in H1; patient and digital solutions grew 50% and 42%, respectively. Product revenue grew 8% in Q2 versus 2% in H1. The company completed the sale of its lab-products business to Eurobio on June 30, exiting kitted laboratory products and refocusing on transplant and specialty-oncology testing, patient services, and digital solutions.

Testing volume was approximately 58,000 in Q2, up 17% year over year; H1 volume grew 17.3%. Q2 average revenue per test was approximately $1,720, including $16M of revenue from prior periods. Revenue growth outpaced volume partly because of increased net collections on previously performed tests: $18.0M in Q2 and $35.6M in H1 under ASC 606. Refund-reserve recognition for third-party payers reduced testing revenue by $2.4M in Q2 and $5.8M in H1. These prior-period collections and payer adjustments materially contributed to reported growth.

Costs and investment

Q2/H1 cost of testing services was $15.918M/$33.015M, up 3%/8%, with laboratory efficiencies partly offsetting higher volume. Product costs were $4.342M/$9.176M, down 13% in both periods, reflecting manufacturing efficiencies and improved supplier pricing. Patient and digital costs rose 78%/65% to $14.706M/$26.404M, primarily due to higher pharmacy cost of goods. R&D increased 33%/24% to $22.376M/$43.792M, while sales and marketing rose 38%/35% to $33.441M/$63.814M. G&A increased 48%/42% to $40.908M/$71.392M, reflecting personnel, legal and consulting costs, and stock-based compensation. H1 stock-based compensation expense was $20.5M.

Cash flow and liquidity

Investing cash flow included $164.8M of net sale proceeds, $114.6M of marketable-security sales and $59.7M of maturities, partly offset by $39.9M of purchases, $5.7M of property-and-equipment additions and $2.0M of long-term investments. Financing outflows included $12.2M of share repurchases, $8.5M of taxes on net share settlements and $1.5M of contingent-consideration payments.

At June 30, cash and cash equivalents were $373.6M, debt outstanding was zero, and the accumulated deficit was $505.4M. Management expects existing cash and anticipated operating and license/collaboration-agreement cash flows to cover requirements for at least 12 months, while noting the company’s history of significant losses and negative operating cash flows.

Transactions, capital allocation and risks

Eurobio paid $171.7M cash consideration for the lab-products business, subject to customary post-closing adjustments; H1 investing cash flow reflected $164.8M of net proceeds. On July 1, CDNA completed the Naveris acquisition for $161.8M cash, including $5.0M in escrow, subject to customary adjustments. Naveris equity holders may receive up to an additional $100.0M based on FY2026 and FY2027 revenue milestones.

The prior $50.0M share-repurchase authorization was fully used by June 30, 2026; H1 purchases were 0.6M shares for $12.2M. A new April 2026 program authorizes up to $100.0M of repurchases over as long as two years, with no purchases through June 30. An automatic shelf registration effective April 28 permits future offerings of equity, debt and other securities.

Testing performance depends on volume, payer coverage and collections, including case-by-case appeals where coverage is unsettled; revenue may be recognized before reimbursement policies or payment histories are established. Unreported samples still incur collection and shipping costs. Patient and digital growth depends on pharmacy and software implementations and customer retention, while clinical-study timing can make R&D spending vary materially. The company continues to invest in clinical studies and product development to expand its transplant pipeline and diversify revenue.

Market risk

At June 30, 2026, CDNA held $373.6 million in cash and cash equivalents, consisting of bank deposits. The company reported no material interest-rate exposure; a hypothetical 100-basis-point increase or decrease in interest rates would have an approximate $3.7 million impact on its unaudited condensed consolidated balance sheets.

CDNA had operations in Sweden and sales to other countries. Testing-services and patient-and-digital-solutions revenue was primarily denominated in U.S. dollars; product revenue was primarily denominated in U.S. dollars and euros. Some operating expenses were denominated in Swedish kronor, Australian dollars, and euros. Following the sale of its lab products business, CDNA said its foreign-currency exposure was not significant. It does not hedge foreign-currency risk and did not expect a hypothetical 10% exchange-rate change to materially affect its financial condition or results of operations.

Controls and Procedures

As of June 30, 2026, the CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable-assurance level. During the three months ended June 30, 2026, no changes in internal control over financial reporting materially affected, or were reasonably likely to materially affect, those controls. This section reported no financial results or other material business developments.

Risk factors and material developments

Growth, adoption and profitability

CareDx’s growth and path to sustained profitability depend on clinician adoption, reimbursement, continued evidence of clinical utility and cost-effectiveness, and successful commercialization of new tests. Revenue remains dependent on the existing transplant-testing portfolio for at least the next two years. Established biopsy practices may limit adoption or mean CareDx tests are used alongside, rather than instead of, biopsies. Protocol biopsies and provider economics can also affect test use. Clinical studies may be delayed or fail to support adoption or reimbursement, while rapid changes in diagnostics could make existing tests less competitive. Competitors—including Natera, Eurofins, iMDx and Verici in various transplant-testing markets—may have greater resources or offer lower-priced alternatives, pressuring prices and margins.

Despite Q2 2026 net income of $110.6M, compared with a net loss of $8.6M in Q2 2025, CareDx cautions that it has not achieved consistent profitability. Its accumulated deficit was $505.4M at June 30, 2026. Cash and cash equivalents were $373.6M. The company expects significant operating expenses to continue and potentially rise, including spending on research and development, clinical validation, commercialization, staffing, laboratory capacity, regulatory compliance, litigation and integration. It may need additional capital; financing could be unavailable or costly, dilute shareholders, impose debt restrictions, or require surrendering valuable rights.

Reimbursement, billing and healthcare regulation

Medicare is a significant revenue exposure: in Q2 2026, Medicare revenue from AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung represented 37% of testing-services revenue and 30% of total revenue. The 2026 CMS rate for AlloSure under PLA Code 0540U was approximately $2,753, an $88 reduction from prior pricing for AlloSure Kidney and no change for AlloSure Heart or Lung. NavDx has Medicare coverage at a national price of $1,800 under CPT 0356U. A July 2026 final MolDX/Noridian coverage determination affirmed coverage for the company’s kidney, heart and lung transplant tests, including for-cause and surveillance testing, subject to criteria, and is expected to take effect August 30, 2026. Future coverage, utilization or payment changes could still materially affect demand and revenue. Private-payer rate reporting required in 2026 could inform Medicare rates for certain tests in 2027–2029; CareDx does not expect it to materially affect current Medicare pricing.

Billing and collection are complicated by payer-specific coverage, authorization and documentation rules; claims can be delayed, denied, underpaid or recouped, creating uneven cash flows. A significant Medicare Advantage payer dispute concerns claims CareDx says were improperly denied, underpaid or recouped. Government cost controls, the 2% Medicare sequestration cut (expected to remain through at least 2032), and OBBBA provisions reducing federal healthcare funding and adding eligibility requirements could constrain coverage or access.

Following prior TPE audits, CareDx says 100% of appealed claims were resolved in its favor. A 2023 UPIC review identified a $38,975.02 Medicare overpayment, with four claims still under appeal; in Q2 2025, the UPIC concluded a second records request required no further information and identified no overpayment. Audits nevertheless carry potential repayment, payment-suspension and referral risks.

Laboratory-developed-test regulation remains uncertain. A 2025 federal court ruling and subsequent FDA action limited the agency’s asserted authority over laboratory services, but future FDA or congressional action could change the framework. FDA oversight could require additional studies, trials, clearances and ongoing quality and reporting obligations, increasing costs and delaying or restricting commercialization. CareDx must also maintain CLIA certification and state laboratory licenses; it reports CAP recertification after a 2024 inspection and a successful March 2026 inspection.

Operations, supply and execution

Testing is concentrated in laboratories in Brisbane, Waltham and Durham; operations are not fully redundant, and not every test can readily be transferred. Relocation or expansion requires facilities, specialized equipment, trained personnel, validation and approvals. Brisbane has no earthquake insurance, and damage or interruptions from earthquakes, severe weather, power or transportation failures could delay testing and lose customers. CareDx also relies on third-party sample-processing services, expedited shipping, and sole-source suppliers for key instruments, reagents and consumables; it has no guaranteed supply agreements with Thermo Fisher, Becton Dickinson or Avantor. Disruptions could interrupt testing or delay product launches. Scaling laboratory, customer-service, billing and quality systems while retaining scarce scientific, laboratory and commercial talent creates further execution risk.

Product errors or inaccurate analyses could cause false results, recalls, liability claims, regulatory action or reputational damage; insurance may be inadequate. Cyber incidents, system failures or privacy-law violations could disrupt laboratory operations, sample tracking, results, billing, research and reporting, or expose sensitive patient and other data. CareDx relies on on-site, cloud and third-party systems, and its controls and insurance may not prevent or fully cover losses. Applicable requirements include HIPAA/HITECH, state privacy laws and GDPR; GDPR penalties can reach the greater of €20 million (or £17.5 million in the UK) or 4% of global annual revenue.

Acquisitions, intellectual property and legal exposure

The July 1, 2026 acquisition of Naveris takes CareDx beyond its historical transplant focus into specialty oncology testing, including minimal residual disease and recurrence monitoring. CareDx has limited experience in this market, and integration of technology, laboratories, quality systems, staff, payer relationships and commercial operations—and expected cross-selling benefits—are uncertain. Acquisitions may consume cash, add costs or debt, dilute shareholders and fail to deliver expected benefits; weaker performance or market conditions could also trigger goodwill or intangible-asset impairment.

As of June 30, 2026, CareDx held eight U.S. patents related to transplant-rejection and autoimmune-disease diagnosis (expiring August 2027–May 2035) and four related to organ-function recovery and allograft preservation (July 2038–June 2041). Naveris added five U.S. patents covering HPV-driven cancer detection and monitoring (September 2039–September 2041). Patent challenges, limited foreign protection, third-party license disputes or infringement claims could weaken protection, require costly licensing or redesign, or disrupt sales. A 2021 court ruling invalidated three patents CareDx asserted against Natera; CareDx says this did not affect its ability to provide AlloSure but could limit its ability to block competing products. Its exclusive Stanford license terminated in October 2023.

The DOJ closed its investigation without a finding of wrongdoing, and the SEC concluded its investigation without recommending enforcement. On April 23, 2026, the related private qui tam case was voluntarily dismissed with DOJ consent and dismissed by the court. CareDx says the inquiries did not concern product safety or clinical utility; other agency requests or investigations remain possible. Successful enforcement could bring damages, penalties, repayment obligations or exclusion from government programs. Litigation more generally could divert resources and produce adverse judgments or settlements.

Market, capital and shareholder risks

International expansion depends on partners, local approvals and reimbursement and carries added compliance, collection, shipping, currency, sanctions and geopolitical risks. Tariffs and retaliation create further uncertainty for suppliers and partners. Macroeconomic pressure could weaken demand and access to financing. AI use in products and internal processes carries risks from inaccurate or biased outputs, changing regulation, and third-party data, licensing and cybersecurity issues.

CareDx shares traded between $16.05 and $29.28 from January 2 to June 30, 2026. Volatility may reflect reimbursement, evidence, competition, regulatory developments, spending and market conditions; short-seller allegations could prompt costly investigations or litigation. The company repurchased 0.6 million shares for $12.2M in Q2 and H1 2026 under its May 2025 program, which had no remaining authorization at June 30. A separate April 2026 program authorized up to $100.0M over two years. Repurchases are discretionary and can compete with investment needs; CareDx does not expect to pay dividends in the foreseeable future. Ownership concentration, share sales and anti-takeover provisions may affect shareholder influence or control transactions.

Management reported disclosure controls and internal control over financial reporting effective at June 30, 2026. A material weakness involving COSO control components and immaterial corrected 2024 stock-based-compensation errors was remediated during 2025; future deficiencies could still impair reporting, liquidity, access to capital or Nasdaq listing.

For the three months ended June 30, 2026, no directors or officers adopted or terminated a Rule 10b5-1(c) trading plan or a non-Rule 10b5-1 trading arrangement. The section reports no financial results, business developments, or other material changes.