CDNA CareDx, Inc 10-Q 2026-09-30 section summaries

CareDx, Inc. — Q3 and nine months ended September 30, 2026

Consolidated results

CareDx has one operating and reportable segment. Revenue growth was led by testing services. Q3 operating income improved, while nine-month operating income included a large gain from the lab products business sale.

Q3 revenue increased 39.3%; 9M revenue increased 43.3%. Nine-month operating income includes a $112.966 million gain on the lab products business sale, so it substantially reflects that one-time transaction. Q3 net income included an $8.600 million income tax benefit; the 9M tax benefit was $4.750 million.

Revenue by category

Testing services growth was 65.2% in Q3 and 58.3% for 9M; patient and digital solutions growth was 30.9% in Q3 and 37.8% for 9M. Product revenue declined following the June 30 sale of the lab products business. Testing-services cost was $24.683 million in Q3 2026 versus $14.705 million; patient and digital solutions cost was $15.604 million versus $10.320 million. For 9M, the corresponding costs were $57.698 million versus $45.224 million and $42.008 million versus $26.307 million.

Cash flow

Operating cash flow included the reversal of the sale gain and $30.112 million of stock-based compensation. Investing cash flow included $164.792 million of net cash proceeds from the lab products sale and $145.769 million paid for Naveris, net of cash acquired. Financing cash flow was negative $5.510 million, including $12.232 million of share repurchases. Cash, cash equivalents and restricted cash increased by $185.910 million to $251.890 million.

Balance sheet and capitalization

The acquired and developed technology balance was $108.548 million; customer relationships, $17.376 million; commercialization rights, $3.609 million; trademarks and trade names, $6.755 million; acquired in-process technology, $1.250 million; and a favorable license agreement, $2.243 million. Net intangible assets included $136.288 million of finite-lived and $3.493 million of indefinite-lived assets. Goodwill and intangibles increased principally from the Naveris acquisition; the lab products sale removed $4.368 million of goodwill. No goodwill or intangible impairment indicators were identified.

Common shares outstanding increased from 50,916,644 at December 31, 2025 to 52,460,815 at September 30, 2026. Stock-based compensation expense was $9.655 million in Q3 versus $8.418 million and $30.112 million for 9M versus $26.773 million. At period-end, 9.270 million shares were reserved for potential issuance. The company authorized a new $100.0 million repurchase program in April 2026; no purchases had been made under it by September 30.

Transactions, estimates and risks

CareDx acquired all of Naveris on July 1, 2026, expanding its specialty oncology diagnostics business, including NavDx. Acquisition-date consideration was approximately $203.300 million, including $151.715 million of net cash paid to sellers and $44.025 million fair value of revenue-milestone consideration. Sellers may receive up to an additional $100.0 million based on 2026 and 2027 revenue milestones. Preliminary purchase accounting recorded $85.741 million of goodwill and $125.119 million of acquired identifiable intangibles; the allocation remains subject to revision. Naveris contributed approximately $12.5 million of Q3 revenue and a $6.4 million net loss. A $9.8 million valuation-allowance release related to the acquisition contributed to the Q3 tax benefit.

The company sold its Swedish subsidiary and certain kitted laboratory products and related software to Eurobio. The transaction closed June 30, 2026, for approximately $171.7 million before transaction costs and final adjustments; the recognized gain was approximately $113.0 million. The sale was not treated as discontinued operations.

Medicare accounted for 31% of Q3 revenue (32% in Q3 2025) and 30% of 9M revenue (34% in 9M 2025); Medicare represented 25% of receivables at September 30, 2026, versus 21% at year-end 2025. Revenue estimates for tests performed in prior periods generated $14.7 million of net revenue in Q3 and $44.5 million for 9M, after increases to payer refund reserves of $2.6 million and $8.4 million, respectively. The Level 3 contingent-consideration liability was $44.186 million at September 30, 2026, and will be remeasured using assumptions including projected NavDx revenue.

Natera litigation remains a potential exposure: a prior approximately $96.3 million jury award against CareDx was overturned, and CareDx reports a loss remains reasonably possible, up to that amount plus interest, while Natera’s appeal proceeds. Separately, CareDx’s $44.9 million jury award in its false-advertising case was not recognized as a receivable or gain. The SEC investigation ended without an enforcement recommendation; the related qui tam action was dismissed in April 2026.

CareDx (CDNA) — Q3 and nine months ended September 30, 2026

Consolidated results

Q3 revenue rose 39%; 9M revenue rose 43%. The revenue mix shifted following the June 30 sale of the lab-products business: no product revenue was recorded in Q3, while testing and patient/digital solutions grew. Testing services increased 65% in Q3 and 58% for 9M; patient and digital solutions increased 31% and 38%, respectively.

Reported earnings include significant timing and transaction-related items. Q3 testing-services revenue included $17.3 million recognized for tests performed in prior periods under ASC 606, versus $5.9 million in Q3 2025, partly offset by a $2.6 million reduction from payer refund reserves. For 9M, these amounts were $52.9 million and $1.0 million, respectively, with an $8.4 million reduction from payer refund reserves. The 9M operating result included a $112.966 million gain on the lab-products sale, recorded as a reduction of operating expenses. Q3 net income was also materially lifted by an $8.600 million income tax benefit, primarily a $9.8 million deferred tax benefit from a valuation-allowance release related to Naveris. The 9M income tax benefit was $4.750 million, including that deferred benefit, partly offset by $4.6 million of current tax expense on the sale gain and approximately $0.5 million of other federal and state tax expense.

Business and operating performance

Q3 testing volume was approximately 75,900, up 51% year over year, including NavDx; excluding NavDx, testing-services volume grew 20.8%. NavDx contributed $12.5 million of Q3 revenue following the Naveris acquisition. Excluding NavDx, 9M testing-services volume grew 18.3%. CLIA Tests represented 86% of Q3 revenue and 80% of 9M revenue, compared with 72% in both prior-year periods.

Testing costs increased with volume and NavDx costs and included $2.7 million of acquired-intangible amortization, partly offset by laboratory efficiencies. Higher pharmacy sales drove increased patient-and-digital costs. Personnel costs contributed to higher sales and marketing and G&A expenses; G&A also rose with stock compensation, legal and consulting, and software costs. Nine-month R&D, sales and marketing, and G&A expenses were higher year over year, while litigation settlement expense declined to $0.600 million from $5.710 million.

Cash flow and liquidity

Operating cash flow included $30.1 million of stock-based compensation (versus $26.8 million), $13.9 million of depreciation and amortization (versus $11.1 million), and a $113.0 million noncash sale gain; net operating assets changed by $12.9 million (versus $8.4 million). Investing cash flow reflected the lab-business sale and marketable-security activity, partly offset by the Naveris acquisition. Financing cash used was much lower than in 2025, when share repurchases were substantially larger.

At September 30, 2026, CareDx had $250.5 million of cash and cash equivalents, no debt outstanding, and an accumulated deficit of $486.2 million. Despite its history of significant losses and negative operating cash flows, management expects existing cash and operating- and license-related cash flows to cover anticipated requirements for the next 12 months.

Portfolio changes, capital allocation and risks

The June 30 sale of the lab-products business to Eurobio generated approximately $171.7 million of cash proceeds, subject to customary post-closing adjustments. Investing cash flow reported $164.8 million of net proceeds. The $112.966 million gain was net of approximately $4.8 million of transaction costs and included derecognition of $4.4 million of goodwill allocated to the business; foreign assets in Sweden and Australia were also transferred.

CareDx acquired Naveris on July 1 for $203.3 million of total consideration: $159.3 million in cash and $44.0 million of acquisition-date fair value for contingent consideration. Investing cash flow recorded the acquisition at $145.8 million net of $13.5 million cash acquired. Former Naveris securityholders may receive up to $100.0 million of additional cash for FY 2026 and FY 2027 revenue milestones, potentially payable in 2027 and 2028. The Level 3 contingent-consideration liability is remeasured each reporting date, with changes recognized in operating expenses; part attributable to post-combination services is expensed over the service period. The purchase-price allocation remains preliminary.

NavDx volume growth and reimbursement per test are central to Naveris valuation and potential milestone payments. Changes in payer coverage or reimbursement, clinician adoption, competition from other circulating tumor DNA assays, and integration into a specialty-oncology market where CareDx has limited experience could affect payments and the value of acquired goodwill and intangible assets.

In 9M 2026, CareDx repurchased 0.6 million shares for $12.2 million under its May 2025 program, which had no remaining capacity at September 30; no Q3 purchases were made under that program. A new $100.0 million repurchase authorization announced in April remained fully available. Financing cash flows also included $13.1 million of taxes on net share settlements, partly offset by $18.8 million of option-exercise proceeds and $2.5 million of employee stock purchase plan proceeds. An effective automatic shelf registration filed in April permits potential future securities offerings.

Market risk

At September 30, 2026, cash and cash equivalents were $250.5 million, all held as bank deposits. The company estimated that a hypothetical 100-basis-point increase or decrease in interest rates would have an approximately $2.5 million impact on its unaudited condensed consolidated balance sheets, but it did not expect material interest-rate risk.

Foreign-exchange exposure arose from Swedish operations, international sales, foreign-currency transactions, and foreign-denominated assets and liabilities. Testing-services and patient and digital-solutions revenue were primarily denominated in U.S. dollars; product revenue was primarily denominated in U.S. dollars and euros. Some operating expenses were denominated in Swedish krona, Australian dollars, and euros. After selling its lab products business, the company characterized its foreign-exchange exposure as not significant. It does not hedge currency exposure and stated that a hypothetical 10% change in exchange rates would not materially affect its financial condition or results of operations.

As of September 30, 2026, CDNA’s CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable-assurance level. The company is integrating acquired Naveris into its internal control over financial reporting and intends to exclude Naveris from management’s effectiveness assessment for the year of acquisition, as permitted by SEC guidance. Other than the Naveris integration, no changes during Q3 2026 materially affected, or were reasonably likely to materially affect, internal control over financial reporting.

CareDx (CDNA) — Item 1A: Risk Factors

Performance, funding, and growth uncertainty

Revenue grew 39% year over year in Q3 2026 and 14% in FY2025, but CareDx cautions that growth and profitability may not continue. The company had $250.5M in cash and cash equivalents and an accumulated deficit of $486.2M at September 30, 2026. It expects spending on R&D, clinical studies, commercial expansion, infrastructure, and acquisition integration to rise; if operating cash and available financing prove inadequate, it may need to slow growth, reduce R&D, or curtail operations. Equity financing could dilute shareholders, while debt could add senior claims and restrictions.

Reimbursement, adoption, and competitive pressures

Medicare revenue from AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare, AlloSure Lung, and NavDx represented 37% of testing-services revenue and 31% of total revenue in Q3 2026. Coverage and payment changes could therefore materially affect growth and profitability. CMS set 2026 CLFS rates for AlloSure at approximately $2,753—$88 below the prior AlloSure Kidney price and unchanged for AlloSure Heart and Lung. Preliminary 2027 rates would leave AlloMap at $3,240 and raise AlloSure to $2,840; final rates were pending. NavDx’s $1,800 ADLT rate is subject to annual repricing based on reported private-payer rates.

A final LCD published July 16, 2026, effective August 30, affirmed Medicare coverage for kidney, heart, and lung transplant tests, including for-cause and surveillance testing, subject to criteria. However, coverage can be revised or utilization constrained. NavDx depends on a single LCD. Private and government payers can deny or recoup claims over eligibility, medical necessity, documentation, or administrative requirements, delaying collections and reducing realized revenue. A significant Medicare Advantage dispute involves claims CareDx says were improperly denied, underpaid, or recouped, while the payer seeks further recoupments. Following earlier TPE audits, claims appealed were resolved in CareDx’s favor; a 2023 UPIC notice identified a $38,975.02 Medicare overpayment, with four claims still under appeal. A second UPIC review in 2025 identified no overpayment at that time.

Clinician adoption depends on evidence of accuracy, clinical utility, and cost-effectiveness, and may be slowed by established biopsy practices, reimbursement incentives, or use of conventional tests. CareDx competes with standard-of-care methods and diagnostic companies in transplant testing and oncology; larger competitors may have greater resources, stronger relationships, or lower-priced and simpler products. NavDx expands the company into specialty oncology, a market in which CareDx has limited experience and faces different reimbursement, adoption, regulatory, and competitive dynamics. Continued growth also depends on developing new tests and digital solutions, obtaining persuasive clinical evidence, and maintaining interoperability with transplant centers’ systems.

Operations, acquisitions, and technology

Testing is performed at Brisbane, Waltham, and Durham facilities; the network is not fully redundant, and specialized equipment, staff, validation, and licensing mean work cannot necessarily be transferred quickly. Brisbane faces earthquake risk, while Durham and Waltham face severe-weather and power-disruption risks. CareDx has property and business-interruption insurance but no earthquake insurance. The company also relies on external sample-processing services and a limited set of suppliers for instruments, reagents, and consumables; it lacks guaranteed supply agreements for certain products from Thermo Fisher, Becton Dickinson, Bio-Rad, and Avantor. FDA approval of an updated AlloMap using Roche real-time PCR provides an alternative platform to the ABI 7900, but does not eliminate broader supply risks.

CareDx may not realize expected benefits from acquisitions, including Naveris, or successfully integrate acquired technology, personnel, laboratories, quality systems, payer relationships, and controls. Integration may add costs, liabilities, debt, dilution, or goodwill and intangible-asset impairment. After selling its lab-products business to Eurobio Scientific in June 2026, CareDx remains responsible for transition services and certain indemnifications and relies on Eurobio for some North American products. Laboratory errors, false results, or software failures could lead to retesting, liability claims, reputational damage, and interruptions. Goodwill and intangible assets could be impaired if growth or performance disappoints.

Regulation, legal, and intellectual-property exposure

The regulatory status of laboratory-developed tests remains uncertain. Following a 2025 federal court decision limiting FDA authority over laboratory services, the FDA restored prior regulatory text and the current administration indicated it would not exercise authority over LDTs; future policy could change. FDA oversight could require additional studies, trials, clearances, or labeling changes, delaying or limiting commercialization. CareDx must also maintain CLIA certification, state licenses, and compliance with healthcare fraud-and-abuse, privacy, and data-security laws. FCA penalties for violations assessed after July 3, 2025, are $14,308–$28,619 per claim. CareDx’s SEC investigation concluded without an enforcement recommendation; DOJ declined to intervene in the related qui tam action, which was dismissed April 23, 2026.

As of September 30, 2026, CareDx owned or exclusively licensed eight U.S. transplant-rejection and autoimmune-disease patents expiring August 2027–May 2035, four organ-function and allograft-preservation patents expiring July 2038–June 2041, and, through Naveris, exclusive rights to six HPV-cancer patents expiring September 2039–September 2041. Patent validity and enforceability are uncertain; three patents asserted against Natera were ruled invalid in 2021, though that ruling did not affect CareDx’s ability to provide AlloSure. IP disputes, third-party license termination, or trade-secret and data disputes could require damages, royalties, redesign and revalidation, or discontinued sales.

Cyberattacks, system outages, and privacy-law changes could disrupt testing, reporting, billing, or R&D and expose sensitive health information. CareDx also faces evolving U.S. and international privacy requirements, including GDPR penalties of up to the greater of €20 million or 4% of global annual revenue.

Capital markets, governance, and controls

CareDx’s share price ranged from $16.05 to $65.00 from January 2 through September 30, 2026. The May 2025 repurchase program bought 0.6 million shares for $12.2M in the first nine months of 2026; no shares were repurchased in Q3, and no authorization remained at September 30. Under the April 2026 program, no shares had been repurchased and the full $100.0M authorization remained. Repurchases compete with other uses of capital and incur a 1% excise tax on the fair market value of net repurchases. The company does not expect to pay cash dividends in the foreseeable future.

Disclosure controls and internal control over financial reporting were effective at September 30, 2026. A material weakness identified at year-end 2024 involving incomplete COSO control-framework components caused immaterial corrected stock-based compensation errors and was remediated during FY2025. Future control failures could cause reporting errors, restatements, regulatory consequences, or impaired access to capital. Public-company compliance, stock volatility, short-seller allegations, and governance provisions may also increase costs, distract management, or affect shareholder rights.

Q3 2026 insider trading plans

Six directors, officers, or trusts associated with directors adopted Rule 10b5-1 plans during the quarter, covering up to 536,077 common shares in total. No other covered director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q3.

The plans provide for sales under specified formulas and may end earlier if specified events occur or the planned sales are completed.

Executive transaction bonuses

On Oct. 26, 2026, the Compensation Committee approved $1.475 million in one-time discretionary cash transaction bonuses for executives’ work related to the June 30 sale of the lab products business to Eurobio and the July 1 acquisition of Naveris:

Payment was expected around Dec. 11, 2026, subject to continued employment through the payment date. The bonuses were outside any company- or stockholder-approved plan and were in addition to the executives’ FY2026 annual cash incentives.