ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the SEC. Historical results are not necessarily indicative of future results.
A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 is presented under Results of Operations of this Form 10-K. Discussions regarding our financial condition and results of operations for fiscal 2024 compared to 2023 have been omitted from this Annual Report on Form 10-K, but can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025, which is available without charge on the SEC's website at www.sec.gov and on our investor relations website at caredx.com.
Overview
We are a precision medicine company dedicated to improving outcomes for transplant patients and advancing organ health. We deliver solutions designed to empower clinicians and improve patient outcomes. Our integrated solutions include non-invasive molecular testing for heart, kidney, and lung transplants; laboratory products; digital health technologies; and patient solutions that support care before and after transplant. CareDx is the leading provider of genomics-based information for transplant patients.
Our commercially available post-transplant testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA, or dd-cfDNA, solution for kidney transplant patients, AlloMap® Heart, a gene expression profiling solution for heart transplant patients, AlloSure® Heart, a dd-cfDNA solution for heart transplant patients, HeartCare, the combined use of AlloMap Heart and AlloSure Heart, and AlloSure® Lung, a dd-cfDNA solution for lung transplant patients. We have initiated several clinical studies to generate data on our existing and planned future testing services. From time to time, we partner with pharma and biopharma companies to use our technology and tests, often in clinical trials, to identify or screen for patients that may be appropriate candidates for their products. We also offer high-quality products in the pre-transplant space that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. We also provide digital transplant solutions and various offerings that help transplant centers with patient management, outcomes quality and operational support.
See Part I, Item 1 (Business) of this Annual Report on Form 10-K for further information about our business.
Fourth Quarter Business Highlights
•Revenue of $108 million, an increase of 25% year-over-year
•Testing services revenue of $78 million, an increase of 23% year-over-year, and testing services volume of approximately 53,000, an increase of 17% year-over-year
•Patient and digital solutions revenue of $16.8 million and product revenue of $13.3 million, representing year-over-year growth of 47% and 17%, respectively
•Average revenue per test of approximately $1,480 including approximately $5 million in prior period revenue
•Net loss of $4 million, compared to net income of $88 million for the fourth quarter of 2024
•Cash flow from operations of $21.4 million
•Share repurchases of $12 million during the quarter of 773,000 shares at an average price of $15.79 per share
Full Year 2025 Financial Highlights
•Revenue of $380 million, an increase of 14% year-over-year
•Testing services revenue of $275 million, an increase of 10% year-over-year, and testing services volume of approximately 200,000, an increase of 14% year-over-year
•Patient and digital solutions revenue of $57 million and product revenue of $48 million, representing year-over-year growth of 31% and 19%, respectively
•Net loss of $21 million
•Cash flow from operations of $42 million
•Cash, cash equivalents and marketable securities of approximately $200 million as of December 31, 2025
•Share repurchases of $88 million during the year of 5.8 million shares at an average price of $15.16 per share
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Factors Affecting Our Performance
The Number of AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung Tests We Receive and Report
The growth of our testing services is tied to the number of AlloSure Kidney, AlloMap Heart and AlloSure Heart, HeartCare and AlloSure Lung patient samples we receive and patient results we report. We incur costs in connection with collecting and shipping all samples and a portion of the costs when we cannot ultimately issue a report. As a result, the number of patient samples received largely correlates directly to the number of patient results reported.
Continued Growth of Patient and Digital Sales
The growth of our patient and digital revenues is tied to the continued successful implementation of our pharmacy solutions, Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing pharmacy, MedActionPlan, Ottr and XynManagement customers. The Ottr software, TransChart, Tx Access and XynQAPI are currently implemented in multiple locations in the United States. The Ottr software implementation and XynQAPI implementation and support teams are based in Omaha, Nebraska. In addition, patient solutions offered by TTP in Flowood, Mississippi include hospital-affiliated pharmacies located on-site at the transplant center and specialty pharmacies that provide transplant-specific care and dispensing services. Additionally, with of HLA Data Systems, we are able to support HLA laboratories in managing their day-to-day workflow.
Development of Additional Services and Products
Our development pipeline includes other solutions to help clinicians and transplant centers make personalized treatment decisions throughout a transplant patient’s lifetime. We expect to invest in research and development in order to develop additional services and products. Our success in developing new services and products will be important in our efforts to grow our business by expanding our potential market opportunity and diversifying our sources of revenue.
Timing of Research and Development Expenses
Our spending on research and development may vary substantially from quarter to quarter. We conduct clinical studies to validate our new products, as well as ongoing clinical and outcome studies to further the published evidence to support our commercialized tests. Spending on research and development for both experiments and studies may vary significantly by quarter depending on the timing of these various expenses.
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Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
(In thousands)
Year Ended December 31,
Revenue:
Operating expenses:
Other income:
Testing services revenue
Testing services revenue increased by $25.1 million, or 10%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by testing services volume growth of approximately 14% as compared to the year ended December 31, 2024. This increase was partially offset by an increase in the refunds reserve of $3.5 million, and a decrease of $7.8 million in collections during the year ended December 31, 2025, as compared to the year ended December 31, 2024, under ASC 606 related to specific tests performed in prior periods.
Product revenue
Product revenue increased by $7.6 million, or 19%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to higher sales of our commercial NGS-based kitted solutions resulting from growth in our existing business including conversions of targeted customers.
Patient and digital solutions revenue
Patient and digital solutions revenue increased by $13.3 million, or 31%, during the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by higher pharmacy sales and growth in our digital solutions, particularly an expanded customer base from Ottr software.
Cost of testing services
Cost of testing services increased by $6.4 million, or 12%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily attributed to higher testing services volume, partially offset by the continuous efficiency measures to lower laboratory expenses.
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Cost of product
Cost of product decreased by $0.4 million, or 2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily due to certain cost reduction efforts offset by an increased sales of our commercial NGS-based kitted solutions.
Cost of patient and digital solutions
Cost of patient and digital solutions increased by $7.5 million, or 25%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to an increase in the cost of goods from our pharmacy business resulting from higher sales.
Research and development
Research and development expenses decreased by $1.1 million, or 1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily attributable to decreases of $4.7 million in clinical trial expenses, $2.0 million in consulting and licensing expense and $1.5 million in stock-based compensation expense, partially offset by increases of $5.5 million in personnel-related costs and $1.6 million in software-related expenses.
Sales and marketing
Sales and marketing expenses increased by $20.7 million, or 25%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily attributable to increases of $15.4 million in personnel-related costs, $4.5 million in marketing expenses, $3.2 million in consulting expenses and $0.5 million in travel expenses, partially offset by a decrease of $2.9 million in stock-based compensation expense.
General and administrative
General and administrative expenses decreased by $17.6 million, or 14%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily attributable to decreases of $25.7 million in stock-based compensation expense and $2.4 million in legal and consulting expenses, partially offset by increases of $3.7 million in software-related costs, $2.9 million in personnel-related costs, $2.3 million in a one-time impairment charge related to an intangible asset and associated construction in progress, $1.0 million in equipment related expenses and $0.6 million in travel expenses.
Litigation expense
The change in litigation settlement expense was mainly due reversal of litigation expense in 2024 related to the favorable outcome of patent infringement claims filed by Natera against us where the District Court ruled that the patents asserted against us were invalid, which was partially offset by settlement of the Securities Class Action lawsuit during 2025. See Note 8, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K under the caption “Litigation and Indemnification Obligations”, which is incorporated herein by reference.
Interest income, net
Interest income, net, decreased by $2.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to a decrease in cash, cash equivalents, and marketable securities.
Other income, net
Other income, net increased by $0.2 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to an increase in foreign exchange gains.
Income tax expense
For the year ended December 31, 2025, we recorded an income tax expense of $0.3 million on a loss before income taxes of $21.1 million. The effective tax rate for year ended December 31, 2025 differs from the federal statutory tax rate mainly due to the change in unrecognized tax benefits, non-deductible executive compensation and stock-based compensation.
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Liquidity and Capital Resources
We have incurred significant losses and negative cash flows from operations and had an accumulated deficit of $735.4 million at December 31, 2025. As of December 31, 2025, we had cash, cash equivalents and marketable securities of $201.4 million, and no debt outstanding.
We believe our existing cash balance and expected cash from existing operations, including cash from current license agreements and future license and collaboration agreements, or a combination of these, will be sufficient to meet our anticipated cash requirements for the next 12 months.
Shelf Registration Statement
On May 10, 2023, we filed a universal shelf registration statement (File No. 333-271814), or the Registration Statement, and we thereafter filed post-effective amendments on May 9, 2024 and May 23, 2024. The SEC declared the Registration Statement effective on May 23, 2024, and as a result, we can sell from time to time up to $250.0 million of shares of our common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for our own account in one or more offerings under the Registration Statement. The terms of any offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Registration Statement filed with the SEC prior to the completion of any such offering.
Stock Repurchase Programs
On February 20, 2025, our Board of Directors approved the February 2025 Repurchase Program, whereby we were authorized to purchase up to $50.0 million in shares of our common stock over a period of up to two years, commencing on February 20, 2025, through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions. During the three months ended June 30, 2025, we repurchased an aggregate of 3.0 million shares of our common stock under the February 2025 Repurchase Program for an aggregate purchase price of $50.0 million.
Following the completion of the February 2025 Repurchase Program, on May 30, 2025, our Board of Directors authorized a new share repurchase program of up to $50.0 million in shares of our common stock over a period of up to two years, commencing on May 30, 2025, or the May 2025 Repurchase Program. The May 2025 Repurchase Program may be carried out, subject to approval by a committee of our Board of Directors, through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions. During the year ended December 31, 2025, we purchased an aggregate of 2.8 million shares of our common stock under the May 2025 Repurchase Program for an aggregate purchase price of $37.8 million. As of December 31, 2025, $12.2 million was available for future share repurchases under the May 2025 Repurchase Program.
During the year ended December 31, 2025, we purchased an aggregate of 5.8 million shares of our common stock under the February 2025 and May 2025 Repurchase Programs, for a total purchase price of $87.8 million.
Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
(in thousands)
Net cash provided by (used in):
Cash Flows from Operating Activities
Net cash provided by (used in) operating activities consists of net income (loss), adjusted for certain noncash items in the consolidated statements of operations and changes in operating assets and liabilities.
Net cash provided by operating activities for the year ended December 31, 2025 was $42.0 million. Net operating assets increased by $3.8 million. Our noncash items included $34.9 million in stock-based compensation expense, $15.0 million of depreciation and amortization expense, $5.4 million of amortization of right-of-use assets, $2.3 million of impairment of
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intangible asset and associated construction in progress, $1.3 million of amortization of premium on marketable securities, net, and revaluation of contingent consideration to estimated fair value of $0.7 million.
Net cash provided by operating activities for the year ended December 31, 2024 was $38.0 million. Net operating assets decreased by $102.3 million. Our noncash items included $66.4 million in stock-based compensation expense, $14.2 million of depreciation and amortization expense, $5.6 million of amortization of right-of-use assets, $0.6 million of amortization of premium on marketable securities and revaluation of contingent consideration to estimated fair value of $0.9 million.
Cash Flows from Investing Activities
For the year ended December 31, 2025, net cash provided by investing activities was $2.2 million and primarily related to maturities of marketable securities of $154.7 million, partially offset by purchase of marketable securities of $145.9 million, additions of capital expenditures of $5.9 million and $0.7 million related to acquisition of an intangible asset.
For the year ended December 31, 2024, net cash used in investing activities was $0.5 million and primarily related to purchase of marketable securities of $160.3 million, additions of capital expenditures of $6.5 million and purchase of corporate equity securities of $0.6 million, offset by maturities of marketable securities of $166.9 million.
Cash Flows from Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 was $93.4 million and primarily related to repurchase and retirement of common stock of $87.8 million, taxes paid related to net share settlements of restricted stock units of $12.1 million and payments of contingent consideration of $1.5 million. These payments were partially offset by the proceeds from exercises of stock options of $5.7 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $2.3 million.
Net cash used in financing activities for the year ended December 31, 2024 was $5.6 million and primarily related to repurchase and retirement of common stock of $0.5 million, taxes paid related to net share settlements of restricted stock units of $10.1 million and payments of contingent consideration of $5.3 million. These payments were partially offset by the proceeds from exercises of stock options of $8.9 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $1.4 million.
For a discussion regarding our cash flows for the year ended December 31, 2023, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025.
Contractual Obligations
For a discussion regarding our significant contractual obligations as of December 31, 2025 and the effect those obligations are expected to have on our liquidity and cash flows in future periods, refer to Note 8, Commitments and Contingencies, of the consolidated financial statements, and “Results of Operations—Liquidity and Capital Resources”, respectively, included elsewhere in this Annual Report on Form 10-K.
Foreign Operations
The accompanying consolidated balance sheets contain certain recorded assets in foreign countries, namely Stockholm, Sweden, and Fremantle, Australia. Although these countries are considered economically stable and we have experienced no notable burden from foreign exchange transactions, export duties, government regulations, or unanticipated events in foreign countries could have a material adverse effect on our operations.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. Some of these
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accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenue from testing services, product sales and patient and digital solutions revenue in the amount that reflects the consideration which it expects to be entitled in exchange for goods or services as it transfers control to its customers. Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing revenue when, or as, an entity satisfies a performance obligation.
Testing Services Revenue
AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung patient tests are ordered by healthcare providers. We receive a test requisition form with payer information along with a collected patient blood sample. We consider the patient to be our customer and the test requisition form to be the contract. Testing services are performed in our laboratory. Testing services represent one performance obligation in a contract and are performed when results of the test are provided to the healthcare provider, at a point in time.
The healthcare providers that order the tests and on whose behalf we provide testing services are generally not responsible for the payment of these services. The first criterion, identify the contract(s) with a customer, and the second criterion, identify the performance obligations in the contract, of revenue recognition are satisfied when we receive a test requisition form with payer information from the healthcare provider. Generally, we bill third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare or AlloSure Lung test result to the healthcare provider. Amounts received may vary amongst payers based on coverage practices and policies of the payer.
We have used the portfolio approach, a practical expedient under Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, to identify financial classes of payers. Revenue recognized for Medicare and other contracted payers is based on the agreed current reimbursement rate per test, adjusted for historical collection trends where applicable. We estimate revenue for non-contracted payers and self-payers using transaction prices determined for each financial class of payers using history of reimbursements. This includes analysis of an average reimbursement per test and a percentage of tests reimbursed. This estimate requires significant judgment.
We monitor revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Changes in transaction price estimates are updated quarterly based on actual cash collected or changes made to contracted rates, our discussions with payers, and other pertinent information. In addition, consistent with ASC 606-10-25-1, we continue to assess whether it is probable that we will collect substantially all of the consideration to which we will be entitled when determining if a contract with a customer exists.
Refunds Reserve
With respect to revenue recognized related to testing services whereby consideration is expected to be received from third-party payers, we recognized a constraint to the estimated variable consideration such that it is not probable that a significant revenue reversal will occur. When assessing the total consideration expected to be received from third-party payers, a certain percentage of revenues is further constrained for estimated refunds.
Certain refunds were recognized in accrued liabilities until they are either paid to the respective third-party payers or it is determined the refund will not ultimately be paid, at which time the related accrual is reduced with a corresponding increase to testing services revenue. During the year ended December 31, 2025, the refunds reserve to third-party payers were recognized and testing services revenue decreased by $3.5 million for amounts we estimated that would be refunded to third-party payers.
Product Revenue
Product revenue is recognized from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. We generally have a contract or a purchase order from a customer with the specified required terms of order, including the number of products ordered. Transaction prices are determinable in the contract. The products are delivered and risk of loss passed to the customer upon either shipping or delivery, as per the terms of the agreement. There are no further performance obligation related to a contract and revenue is recognized at the point of shipment or delivery consistent with the terms of the contract or purchase order.
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Patient and Digital Solutions Revenue
Patient and digital solutions revenue is primarily derived from software as a service, or SaaS, agreements entered into with various transplant centers, which are our customers for this class of revenue. Digital revenue in connection with software license agreements is recognized at the point in time when control of the license is transferred and made available for the customer's use and benefit. The PCS is recognized ratably over the term of the arrangement beginning on the date when access to the subscription is made available to the customer in accordance with ASC 606.
Software license agreements typically require advance payments from customers upon the achievement of certain milestones. We record deferred revenue in relation to these agreements when cash payments are received for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met, and generally recognize revenue over the contractual term, as performance obligations are fulfilled.
In addition, we derive patient revenue from medication sales. The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay. Based on the individual agreement, we recognize revenue from medication sales when prescriptions are shipped or delivered.
Stock-based Compensation
We use the Black-Scholes Model, which requires the use of estimates such as stock price volatility and expected option lives, to value employee stock options. We estimate the expected option lives using historical data, estimate volatility using our own historical stock prices, estimate risk-free rates using the implied yield currently available in the U.S. Treasury zero-coupon issues with a remaining term equal to the expected option lives, and estimate dividend yield using our expectations and historical data. Compensation expense for stock options issued to nonemployees is calculated using the Black-Scholes Model and is recorded over the service performance period using the straight-line attribution method. Options subject to vesting are required to be periodically remeasured over their service performance period, which is generally the same as the vesting period. The fair value of each restricted stock unit is calculated based upon the closing price of our common stock on the date of the grant.
Our stock-based compensation arrangements vest over a three to four year vesting schedule. We expense our stock-based compensation under the ratable method, which treats each vesting tranche as if it were an individual grant. Compensation expense is recognized on awards ultimately expected to vest and reduced for forfeitures that are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on our historical experience.
Business Combinations
We determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are separable from goodwill. We base the estimated fair value of identifiable intangible assets acquired in a business combination on independent valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, royalty rates, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.
In those circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under Accounting Standard Codification, or ASC, Topic 480, Distinguishing Liabilities from Equity, we recognize a liability equal to the fair value of the contingent payments that we expect to make as of the acquisition date. We remeasure this liability each reporting period and record changes in the fair value as a component of operating expenses.
Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition.
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Acquired Intangible Assets
Amortizable intangible assets include customer relationships, developed technology, commercialization rights, trademarks and trade names and in-process technology assets acquired as part of a business combination or asset acquisition. Intangible assets subject to amortization are amortized over their estimated useful lives. Acquired in-process technology assets and a favorable license agreement are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.
Impairment of Goodwill, Intangible Assets and Long-lived Assets
Goodwill
Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. We have a single reporting unit and consequently evaluate goodwill for impairment based on an evaluation of the fair value of our company as a whole.
Our annual impairment test date is December 1st. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and the market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the reporting unit with the carrying value, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, we record an impairment loss based on the difference.
When necessary, to determine the reporting unit’s fair value under the quantitative approach, we use a combination of income and market approaches, such as estimated discounted future cash flows of that reporting unit, multiples of earnings or revenues, and analysis of recent sales or offerings of comparable entities. We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the reporting unit’s fair value.
In connection with our annual goodwill assessment on December 1, 2025, we performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions, and our market capitalization. Based on this analysis, we concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at that time. As of December 31, 2025, no impairment of goodwill has been identified.
Intangible assets not subject to amortization
We evaluate the carrying value of intangible assets not subject to amortization, related to acquired in-process technology assets and a favorable license agreement.
During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the acquired in-process technology assets are less than their carrying amounts. An impairment loss would be recorded when the fair value of an acquired in-process technology asset is less than its carrying value. If and when development is complete, which generally occurs when the products are made commercially available, the associated acquired in-process technology asset will be deemed finite-lived and will then be amortized based on its estimated useful life.
As of December 31, 2025, no impairment of acquired in-process technology assets has been identified.
Intangible assets and long-lived assets subject to amortization
We evaluate our finite-lived intangible assets and our long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. We then compare the carrying amounts of an asset group with the future net undiscounted cash flows expected to be generated by such asset group. If an impairment exists, we measure the impairment based on the excess carrying value of the asset group over the asset group’s fair value determined using discounted estimates of future cash flows. Intangible assets subject to amortization are carried at cost less accumulated amortization. Amortization expenses are recorded to cost of testing services, cost of product, cost of patient and digital solutions, research and development expenses and sales and marketing expenses in the consolidated statements of operations.
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Recently Issued Accounting Standards
Refer to Note 2, Summary of Significant Accounting Policies - Recent Accounting Pronouncements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position and cash flows.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. We had cash, cash equivalents and marketable securities of $201.4 million at December 31, 2025, which consisted of bank deposits, money market funds, corporate debt securities and U.S government securities. However, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would have an approximate impact of $2.0 million on our consolidated balance sheets.
Foreign Currency Exchange Risk
We have operations in Sweden and sell to other countries throughout the world. As a result, we are subject to foreign currency risks, including transacting in foreign currencies, investment in a foreign entity, as well as assets and debts denominated in foreign currencies. Our testing services revenue is primarily denominated in U.S. dollars. Our product revenue is denominated primarily in U.S. dollars and the Euro. Our patient and digital solutions revenue is primarily denominated in U.S. dollars. Consequently, our revenue denominated in foreign currency is subject to foreign currency exchange risk. A portion of our operating expenses are incurred outside of the U.S. and are denominated in Swedish Krona, Australian Dollar and the Euro, which are also subject to fluctuations due to changes in foreign currency exchange rates. An unfavorable 10% change in foreign currency exchange rates for our assets and liabilities denominated in foreign currencies at December 31, 2025, would have negatively impacted our consolidated balance sheets for the year ended December 31, 2025 by $0.2 million and would have negatively impacted our product and patient and digital solutions revenue by $1.9 million for the year ended December 31, 2025. Currently, we do not have any near-term plans to enter into a formal hedging program to mitigate the effects of foreign currency volatility but may do so in the future if our exposure to foreign currencies should become more significant. We will continue to reassess our approach to managing our risk relating to fluctuations in foreign currency exchange rates.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CareDx, Inc.
Index to Consolidated Financial Statements
Page No.
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 73
Consolidated Balance Sheets 76
Consolidated Statements of Operations 77
Consolidated Statements of Comprehensive Income (Loss) 78
Consolidated Statements of Stockholders’ Equity 79
Consolidated Statements of Cash Flows 80
Notes to Consolidated Financial Statements 81
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of CareDx, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CareDx, Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Testing Services Revenue (non-Medicare) — Refer to Note 2 to the consolidated financial statements
Critical Audit Matter Description
The Company’s testing services revenue is recognized when the results of the test are provided to the healthcare provider, at which time the Company generally bills for its services. The Company estimates revenue for non-Medicare payers using transaction prices determined for each financial class of payers using their history of reimbursements.
The transaction price estimate includes an analysis of the average reimbursement per test and a percentage of tests reimbursed. This estimate requires significant judgment. The Company monitors revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Changes in transaction price estimates are updated quarterly based on actual cash collected. The Company also considers whether historical collections per test are indicative of future collections or if there are any current or expected developments or changes that could affect reimbursement rates.
We identified management’s estimation of the transaction price for transaction services billed to non-Medicare payers as a critical audit matter due to the significant judgments required by management to estimate how coverage practices and policies of payers might affect the amounts received. This required a high degree of auditor judgment and an increased extent of effort, including the involvement of more experienced engagement team members, when performing audit procedures to evaluate the estimated transaction prices.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimation of transaction prices for testing services revenue (non-Medicare), included the following, among others:
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•We tested the effectiveness of controls over the Company’s testing services revenue, including those over the estimation of transaction prices.
•We tested the assumptions used by management to estimate transaction prices by:
◦Testing the mathematical accuracy of management’s calculation.
◦Testing the historical cash receipts from non-Medicare payers used in the estimate of transaction prices by making selections and agreeing the selected information to source documents.
◦Testing management’s ability to estimate transaction prices accurately by comparing recorded revenue to cash receipts received through December 2025.
◦Evaluating trends in revenue and accounts receivable compared to previous periods to identify evidence inconsistent with management’s estimated transaction prices.
•We tested the accuracy and completeness of the lab billing report by tracing to source documents, including the test requisition form, fax support, proof of insurance, and payment support.
/s/ Deloitte & Touche LLP
San Francisco, California
February 25, 2026
We have served as the Company's auditor since 2018.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of CareDx, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of CareDx, Inc. and subsidiaries (the "Company") as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 25, 2026, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
San Francisco, California
February 25, 2026
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CareDx, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
As of December 31,
Assets
Current assets:
Marketable securities, non-current 24,165 —
Liabilities and stockholders’ equity
Current liabilities:
Contingent consideration 161 174
Operating lease liabilities, less current portion 19,679 22,263
Commitments and contingencies (Note 8)
Stockholders’ equity:
Accumulated other comprehensive loss (5,515) (8,569)
Total liabilities and stockholders’ equity $ 413,228 $ 491,050
The accompanying notes are an integral part of these consolidated financial statements.
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CareDx, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share data)
Year Ended December 31,
Revenue:
Operating expenses:
Other income:
Net (loss) income per share (Note 3):
Weighted-average shares used to compute net (loss) income per share:
The accompanying notes are an integral part of these consolidated financial statements.
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CareDx, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Year ended December 31,
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax 3,054 (1,606) 540
The accompanying notes are an integral part of these consolidated financial statements.
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CareDx, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Shares Amount
Issuance of common stock for services 21,965 — 216 — — 216
Issuance of common stock upon exercise of warrants 3,132 — 26 — — 26
Employee stock-based compensation expense — — 48,907 — — 48,907
Foreign currency translation adjustment — — — 540 — 540
Repurchase and retirement of common stock (55,500) — — (522) (522)
Issuance of common stock for services 16,582 — 174 — — 174
Employee stock-based compensation expense — — 66,267 — — 66,267
Foreign currency translation adjustment — — — (1,606) — (1,606)
Issuance of common stock for services 4,794 1 88 — — 89
Employee stock-based compensation expense — — 34,772 — — 34,772
Foreign currency translation adjustment — — — 3,054 — 3,054
The accompanying notes are an integral part of these consolidated financial statements.
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CareDx, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Operating activities:
Asset impairments and write-downs — — 1,000
Impairment of intangible asset and associated construction in progress 2,258 — —
Realized gain on sale of long-term marketable equity securities, net — — (284)
Loss on disposal of asset 48 91 44
Revaluation of common stock warrant liability to estimated fair value — — (10)
Revaluation of contingent consideration to estimated fair value 703 931 2,677
Changes in operating assets and liabilities:
Accrued royalties — — (1,557)
Investing activities:
Purchase of corporate equity securities — (634) (965)
Sale of corporate equity securities — — 2,460
Acquisition of intangible assets (675) — (896)
Acquisition of business, net of cash acquired — — (6,682)
Net cash provided by (used in) investing activities 2,158 (483) 40,446
Financing activities:
Payment of contingent consideration (1,500) (5,325) (625)
Proceeds from exercise of warrants — — 4
Effect of exchange rate changes on cash and cash equivalents (90) 532 (112)
Supplemental disclosures of cash information
Shares issued in lieu of payment $ 88 $ 174 $ 216
Operating lease right-of-use assets $ 3,368 $ 195 $ 607
Contingent consideration $ — $ — $ 3,499
The accompanying notes are an integral part of these consolidated financial statements.
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CareDx, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
CareDx Inc. ("CareDx" or the "Company"), together with its subsidiaries, is a precision medicine company dedicated to improving outcomes for transplant patients and advancing organ health. The Company delivers solutions designed to empower clinicians and improve patient outcomes.The Company's integrated solutions include non-invasive molecular testing for heart, kidney, and lung transplants; laboratory products; digital health technologies; and patient solutions that support care before and after transplant. CareDx is the leading provider of genomics-based information for transplant patients. The Company’s headquarters are in Brisbane, California and it has other primary operations in Omaha, Nebraska; and Stockholm, Sweden.
The Company’s commercially available post-transplant testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA, or dd-cfDNA, solution for kidney transplant patients, AlloMap® Heart, a gene expression profiling solution for heart transplant patients, AlloSure® Heart, a dd-cfDNA solution for heart transplant patients, HeartCare, the combined use of AlloMap Heart and AlloSure Heart, and AlloSure® Lung, a dd-cfDNA solution for lung transplant patients. The Company has initiated several clinical studies to generate data on its existing and planned future testing services. The Company has signed multiple biopharma research partnerships for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy. The Company also offers high-quality products in the pre-transplant space that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. The Company also provides digital technologies solutions and various offerings that help transplant centers with patient management, outcomes quality and operational support.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, and include the accounts of the Company and its subsidiaries. Intercompany transactions have been eliminated.
Certain reclassifications have been made to prior period amounts to conform to current period presentations.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Company's consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to transaction price estimates used for testing services revenue; accrued expenses for clinical studies; inventory valuation; the grant date fair value assumptions used to estimate stock-based compensation expense; income taxes; impairment of long-lived assets and indefinite-lived assets (including goodwill); and legal contingencies. Actual results could differ from those estimates.
Concentrations of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents and marketable securities. The Company’s policy is to invest its cash and cash equivalents in money market funds, obligations of U.S. government agencies and government-sponsored entities, commercial paper, corporate debt securities and various bank deposit accounts. The counterparties to the agreements relating to the Company’s investments consist of financial institutions of high credit standing. The Company is exposed to credit risk in the event of default by the financial institutions to the extent of amounts recorded on the balance sheets that may be in excess of insured limits.
The Company is also subject to credit risk from its accounts receivable, which are primarily derived from revenue earned from AlloSure Kidney, AlloSure Heart, AlloMap Heart, HeartCare and AlloSure Lung tests provided for patients located in the U.S. and Canada, and billed to various third-party payers, from sales of products to distributors, strategic partners and transplant laboratories in Europe, Asia, the Middle East, Africa, the U.S., Latin America and other geographic regions, and from sales of patient and digital solutions. The Company has not experienced any significant credit losses and does not require collateral on receivables. For the years ended December 31, 2025, 2024 and 2023, approximately 34%, 38% and 40%, respectively, of total revenue was billed to Medicare. No other payers represented more than 10% of total revenue for the years ended December 31, 2025, 2024 and 2023.
As of December 31, 2025 and 2024, approximately 21% and 27%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable at either December 31, 2025 or 2024.
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Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less from the date of purchase. Cash equivalents consist primarily of amounts invested in money market funds.
Restricted Cash
As a condition of the lease agreements for certain facilities, the Company must maintain letters of credit and certain minimum collateral requirements. The cash used to support these arrangements of $0.6 million is classified as long-term restricted cash on the accompanying consolidated balance sheets.
Marketable Securities
The Company considers all highly liquid investments in securities with a maturity of greater than three months at the time of purchase to be marketable securities. As of December 31, 2025, the Company’s marketable securities consisted of corporate debt securities and U.S government securities. Those with maturities of greater than three months but less than 12 months from the balance sheet date were classified as current assets, while investments with maturities of one year or beyond one year from the balance sheet date are classified as non-current assets on the consolidated balance sheet.
The Company classifies its marketable securities as held-to-maturity at the time of purchase and reevaluates such designation at each balance sheet date. The Company has the positive intent and ability to hold these marketable securities to maturity. Marketable securities are carried at amortized cost and are adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income, net, on the consolidated statements of operations. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on marketable securities are included in interest income, net. The cost of securities sold is determined using specific identification.
Inventory
Inventories are stated at the lower of actual purchased cost, determined on an average cost basis, on a first-in, first-out basis, or at net realizable value. Excess and obsolete inventories are determined primarily based on expiration dates and future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of product.
Property and Equipment, net
Property and equipment are stated at historical cost, less accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful life is generally three to five years for computer, office and laboratory equipment, and seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term.
The Company capitalizes certain costs incurred for software developed or obtained for internal use, including hosting arrangements. These costs include software licenses and consulting services, as well as employee payroll and payroll-related costs. Capitalized internal-use software costs are usually amortized over a period of three to seven years.
Business Combinations
The Company determines and allocates the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are separable from goodwill. The Company bases the estimated fair value of identifiable intangible assets acquired in a business combination on independent valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. The Company allocates any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, royalty rates, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.
In those circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under Accounting Standard Codification, or ASC, Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments that the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.
Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.
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Acquired Intangible Assets
Amortizable intangible assets include customer relationships, developed technology, commercialization rights, trademarks and tradenames and in-process technology assets acquired as part of a business combination or asset acquisition. Intangible assets subject to amortization are amortized over their estimated useful lives. Acquired in-process technology assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.
Impairment of Goodwill, Intangible Assets and Long-lived Assets
Goodwill
Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. The Company has a single reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole.
The Company’s annual impairment test date is December 1st. During the goodwill impairment review, the Company assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and the market considerations, and the Company's overall financial performance. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company proceeds to compare the estimated fair value of the reporting unit with the carrying value, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, the Company records an impairment loss based on the difference.
When necessary, to determine the reporting unit’s fair value under the quantitative approach, the Company uses a combination of income and market approaches, such as estimated discounted future cash flows of that reporting unit, multiples of earnings or revenues, and analysis of recent sales or offerings of comparable entities. The Company also considers its market capitalization on the date of the analysis to assess thereasonableness of the reporting unit’s fair value.
Indefinite-lived intangible assets
The Company evaluates the carrying value of indefinite-lived intangible assets, related to acquired in-process technology assets and a favorable license agreement.
During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if the Company becomes aware of any events or changes in circumstances that would indicate that the fair value of the acquired in-process technology assets and the favorable license agreement are less than their carrying amounts. An impairment loss would be recorded when the fair value of an acquired in-process technology asset and the favorable license agreement are less than the carrying value. If and when development is complete, which generally occurs when the products are made commercially available, the associated acquired in-process technology asset and the favorable license agreement will be deemed finite-lived and will then be amortized based on the estimated useful life.
Finite-lived intangible assets and long-lived assets
The Company evaluates its finite-lived intangible assets and its long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. The Company then compares the carrying amounts of the asset group with the future net undiscounted cash flows expected to be generated by such asset group. If an impairment exists, the Company measures the impairment based on the excess carrying value of the asset group over the asset group’s fair value determined using discounted estimates of future cash flows. Intangible assets subject to amortization are carried at cost less accumulated amortization. Amortization expenses are recorded to cost of testing services, cost of product, cost of patient and digital solutions, research and development expenses and sales and marketing expenses in the consolidated statements of operations.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company uses the U.S. GAAP fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
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•Level 1: Inputs that include quoted prices in active markets for identical assets and liabilities.
•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of certain financial instruments of the Company, including accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, approximate fair value due to their short maturities. The carrying amount of the contingent consideration liability also represents its fair value.
Leases
The Company determines if an arrangement is or contains a lease at contract inception. For leases with an initial term of 12 months or more, a right-of-use, or ROU, asset, representing the underlying asset during the lease term, and a lease liability, representing the payment obligation arising from the lease, are recognized on the consolidated balance sheet at lease commencement based on the present value of the payment obligation. For operating leases, expense is recognized on a straight-line basis over the lease term. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. The Company also has lease arrangements with lease and non-lease components. The Company does not separate non-lease components from lease components for the Company's facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less.
The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.
Revenue
The Company recognizes revenue from testing services, product sales, and patient and digital solutions revenue in the amount that reflects the consideration that it expects to be entitled in exchange for goods or services as it transfers control to its customers. Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
Testing Services Revenue
AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare and AlloSure Lung patient tests are ordered by healthcare providers. The Company receives a test requisition form with payer information along with a collected patient blood sample. The Company considers the patient to be its customer and the test requisition form to be the contract. Testing services are performed in the Company’s laboratory. Testing services represent one performance obligation in a contract and are performed when results of the test are provided to the healthcare provider, at a point in time.
The healthcare providers that order the tests and on whose behalf the Company provides testing services are generally not responsible for the payment of these services. The first criterion, identify the contracts(s) with a customer, and the second criterion, identify the performance obligations in the contract, of revenue recognition are satisfied when the Company receives a test requisition form with payer information from the healthcare provider. Generally, the Company bills third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare or AlloSure Lung test result to the healthcare provider. Amounts received may vary amongst payers based on coverage practices and policies of the payer. The Company has used the portfolio approach under ASC Topic 606, Revenue from Contracts with Customers, to identify financial classes of payers. Revenue recognized for Medicare and other contracted payers is based on the agreed current reimbursement rate per test, adjusted for historical collection trends where applicable. The Company estimates revenue for non-contracted payers and self-payers using transaction prices determined for each financial class of payers using a history of reimbursements. This includes analysis of the average reimbursement per test and a percentage of tests reimbursed. These estimates require significant judgment.
The Company monitors revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Changes in transaction price estimates are updated quarterly based on actual cash collected or changes made to contracted rates, the Company's discussions with payers, and other pertinent information. In addition,
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consistent with ASC 606-10-25-1, the Company continues to assess whether it is probable that it will collect substantially all of the consideration to which it will be entitled when determining if a contract with a customer exists.
For the years ended December 31, 2025 and 2024, the Company recognized $9.6 million and $17.4 million respectively, in revenue for the tests performed in prior periods, as all performance obligations were satisfied at the time the contract was established.
Refunds Reserve
With respect to revenue recognized related to testing services whereby consideration is expected to be received from third-party payers, the Company recognized a constraint to the estimated variable consideration such that it is not probable that a significant revenue reversal will occur. When assessing the total consideration expected to be received from third-party payers, a certain percentage of revenues is further constrained for estimated refunds.
Certain refunds were recognized in accrued liabilities until they are either paid to the respective third-party payers or it is determined the refund will not ultimately be paid, at which time the related accrual is reduced with a corresponding increase to testing services revenue. During the year ended December 31, 2025, the refunds reserve to third-party payers were recognized and testing services revenue decreased by $3.5 million for amounts the Company estimated that would be refunded to third-party payers.
Product Revenue
Product revenue is recognized from the sale of products to end-users, distributors and strategic partners when all revenue recognition criteria are satisfied. The Company generally has a contract or a purchase order from a customer with the specified required terms, including the number of products ordered. Transaction prices are determinable in the contract. The products are delivered and control is transferred to the customer upon either shipping or delivery, as per the terms of the agreement. There are no further performance obligations related to a contract and revenue is recognized at the point of shipment or delivery consistent with the terms of the contract or purchase order.
Patient and Digital Solutions Revenue
Patient and digital solutions revenue is primarily derived from software as a service, or SaaS, agreements entered into with various transplant centers, which are the Company’s customers for this class of revenue. Digital revenue in connection with software license agreements is recognized at the point in time when control of the license is transferred and made available for the customer's use and benefit. The PCS is recognized ratably over the term of the arrangement beginning on the date when access to the subscription is made available to the customer in accordance with ASC 606.
Software license agreements typically require advance payments from customers upon the achievement of certain milestones. The Company records deferred revenue in relation to these agreements when cash payments are received for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met, and generally recognizes revenue over the contractual term, as performance obligations are fulfilled.
In addition, the Company derives patient revenue from medication sales. The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay. Based on the individual agreement, the Company recognizes revenue from medication sales when prescriptions are shipped or delivered.
Cost of Testing Services
Cost of testing services reflects the aggregate costs incurred in delivering the Company’s testing services. The components of cost of testing services primarily consist of materials and service costs, direct labor costs, stock-based compensation, equipment and infrastructure expenses associated with testing samples, shipping, logistics and specimen processing charges to collect and transport samples, and allocated overhead including rent, information technology, equipment depreciation, utilities and royalties. Royalties for licensed technology, calculated as a percentage of testing services revenues, are recorded as license fees in cost of testing services at the time the testing services revenues are recognized.
Cost of Product
Cost of product reflects the aggregate costs incurred in delivering the Company’s products to customers. The components of cost of product primarily consist of materials costs, manufacturing and kit assembly costs, direct labor costs, equipment and infrastructure expenses associated with preparing kitted products for shipment, shipping, and allocated overhead including rent, information technology, equipment depreciation and utilities. Cost of product also includes amortization of acquired developed technology and adjustments to inventory values, including write-downs of excess or obsolete inventory.
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Cost of Patient and Digital Solutions
Cost of patient and digital solutions primarily consists of personnel-related costs associated with developing, installing and maintaining software, depreciation of servers and equipment, amortization of acquired intangible assets, support of the functionality of the software's platforms, including stock-based compensation expenses, cost of medications and allocated costs of facilities and information technology.
Research and Development Expenses
Research and development expenses, including clinical operations, represent costs incurred to develop diagnostic products and services, high-quality evidence to support the use of the Company’s tests, as well as continued efforts related to improving the Company’s existing products and patient and digital solutions offerings. These expenses include payroll and related expenses, consulting expenses, laboratory supplies, clinical studies and certain allocated expenses as well as amounts incurred under certain collaborative agreements. Research and development costs are expensed as incurred. The Company records accruals for estimated clinical study costs comprised of work performed by contract research organizations based on measure of progress.
Stock-based Compensation
The Company uses the Black-Scholes Model, which requires the use of estimates such as stock price volatility and expected option lives, to value employee stock options. The Company estimates the expected option lives using historical data, estimates volatility using its own historical stock prices, estimates risk-free rates using the implied yield currently available in the U.S. Treasury zero-coupon issues with a remaining term equal to the expected option lives, and estimates dividend yield using the Company’s expectations and historical data. Compensation expense for stock options issued to nonemployees is calculated using the Black-Scholes Model and is recorded over the service performance period using the straight-line attribution method. Options subject to vesting are required to be periodically remeasured over their service performance period, which is generally the same as the vesting period.
The fair value of each restricted stock unit is calculated based upon the closing price of the Company’s common stock on the date of the grant.
The Company's stock-based compensation arrangements vest over a three to four year vesting schedule. The Company expenses its stock-based compensation under the ratable method, which treats each vesting tranche as if it were an individual grant. Compensation expense is recognized on awards ultimately expected to vest and reduced for forfeitures that are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on the Company's historical experience.
Income Taxes
The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. The Company’s assessment of an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit may change as new information becomes available.
Foreign Currency Translation
The functional currency of the Company’s foreign subsidiaries is the local currency for each entity, including the Swedish Krona and Australian dollar. The revenue and expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Foreign currency translation gains and losses on revenue and expenses are recognized in the consolidated statements of operations. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting cumulative translation adjustments are reported in other comprehensive income (loss).
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Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other income and losses affecting stockholders’ equity that, under U.S. GAAP, are excluded from net income or loss. For the Company, such items consist of foreign currency income and losses on the translation of foreign assets and liabilities.
Recent Accounting Pronouncements
Adopted in the current period
In December 2023, the FASB issued Accounting Standards Update, or ASU, No. 2023-09, Income Taxes (Topic 340): Improvements to Income Tax Disclosures, which requires annual disclosures in the rate reconciliation table to be presented using both percentages and reporting currency amounts, and this table must include disclosure of specific categories. Additional information is required for reconciling items that meet a quantitative threshold. The new guidance also requires enhanced disclosures of income taxes paid, including the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions that exceed a quantitative threshold. The Company adopted this ASU on a prospective basis effective January 1, 2025. Refer to Note 12, Income Taxes.
Effective in Future Periods
In December 2025, the Financial Accounting Standards Board, or FASB, issued ASU 2025-11, Narrow-Scope Improvements (Topic 270): Interim Reporting. This update makes targeted, narrow-scope improvements to the interim reporting guidance in Topic 270 to clarify application and improve consistency in practice. The amendments do not change the underlying principles of interim reporting. The amendments in this ASU are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company expects to adopt the guidance in its Form 10-Q for the interim period ending March 31, 2028. The Company is currently evaluating the provisions of this ASU and does not expect to have a material impact on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, or ASU 2025-12. ASU 2025-12 addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. Amendments to all other ASC topics may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and does not expect to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This standard requires entities to disaggregate certain costs and expenses into specific categories and by relevant expense caption in the statement of operations. This guidance will be effective for the Company's annual disclosures for the fiscal year ending December 31, 2027 and for interim period disclosures beginning in the fiscal year ending December 31, 2028. The Company is currently evaluating the potential impact of the new standard on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This standard modernizes the accounting guidance for internal-use software costs to better reflect current development practices, including agile and iterative methodologies. This guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. The Company is currently evaluating the provisions of this ASU and does not expect to have a material impact on its consolidated financial statements.
3. NET (LOSS) INCOME PER SHARE
Basic and diluted net (loss) income per share have been computed by dividing the net (loss) income by the weighted-average number of common shares outstanding during the period.
For the years ended December 31, 2025, and 2023 common share equivalents have been excluded from the calculation of diluted net loss per share, as their effect would be antidilutive.
For the year ended December 31, 2024, all common share equivalents have been included in the calculation of diluted net income per share.
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The following tables set forth the computation of the Company’s basic and diluted net (loss) income per share (in thousands, except shares and per share data):
Year Ended December 31,
Numerator:
Denominator:
Net (loss) income per share:
The following potentially dilutive securities have been excluded from diluted net (loss) income per share because their effect would be antidilutive:
Year Ended December 31,
4. FAIR VALUE MEASUREMENTS
The following table sets forth the Company’s financial assets and liabilities, measured at fair value on a recurring basis, as of December 31, 2025 and 2024 (in thousands):
Fair Value Measured Using
(Level 1) (Level 2) (Level 3) Total Balance
Assets
Cash equivalents:
Liabilities
Short-term liabilities:
Contingent consideration $ — $ — $ 1,617 $ 1,617
Long-term liabilities:
Contingent consideration — — 161 161
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Fair Value Measured Using
(Level 1) (Level 2) (Level 3) Total Balance
Assets
Cash equivalents:
Liabilities
Short-term liabilities:
Contingent consideration $ — $ — $ 2,414 $ 2,414
Long-term liabilities:
Contingent consideration — — 174 174
The following table presents the exercise, changes in estimated fair value, additions, deduction and payments of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):
(Level 3)
Contingent Consideration
Deduction from contingent consideration (500)
Payment related to contingent consideration (5,325)
Payment related to contingent consideration (1,500)
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company’s instruments measured at fair value and their classification in the valuation hierarchy are summarized below:
•Money market funds – Investments in money market funds are classified within Level 1. Money market funds are valued at the closing price using the fund's net asset value reported by the fund sponsor, utilizing actively traded exchange information. At December 31, 2025 and 2024, money market funds were included as cash and cash equivalents in the consolidated balance sheets.
•Contingent consideration –Contingent consideration is classified within Level 3. Contingent consideration relates to assetacquisitions and business combinations. The Company recorded the estimate of the fair value of the contingent consideration based on its evaluation of the probability of the achievement of the contractual conditions that would result in the payment of the contingent consideration. Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met based on management’s estimate of the probability of success and projected revenues for revenue-based considerations at discounted rates of 7% at December 31, 2025 and 7% to 12% at December 31, 2024. The significant input in the Level 3 measurement that is not supported by market activity is the Company’s probability assessment of the achievement of the milestones. The value of the liability is subsequently remeasured to fair value at each reporting date, and the change in estimated fair value is recorded as income or expense within operating expenses in the consolidated statements of operations until the milestones are paid, expire or are no longer achievable. Increases or decreases in the estimation of the probability percentage result in a directionally similar impact on the fair value measurement of the contingent consideration liability. The carrying amount of the contingent consideration liability represents its fair value.
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5. CASH AND MARKETABLE SECURITIES
Cash, Cash Equivalents and Restricted Cash
A reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the amount reported within the consolidated statements of cash flows is shown in the table below (in thousands):
Marketable Securities
All marketable securities were considered held-to-maturity at December 31, 2025 and 2024. The Company determined that it had the positive intent and ability to hold until maturity all marketable securities. The Company assesses whether the decline in value of marketable securities is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. There has been no recognition of any other-than-temporary impairment at December 31, 2025 and 2024.
The amortized cost, unrealized holding gains, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
Amortized Cost Unrealized Holding Gains Fair Value
Marketable securities:
Amortized Cost Unrealized Holding Gains Fair Value
Marketable securities:
As of December 31, 2025, $24.2 million of marketable securities had maturities of more than one year and less than two years and are classified as non-current assets.
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
On December 1, 2025, the Company performed a qualitative assessment of its reporting unit taking into consideration past, current and projected future earnings, recent trends and market conditions, and its market capitalization. Based on this analysis, the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at this time. As of December 31, 2025, 2024 and 2023, there has been no impairment of goodwill.
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Intangible Assets
The following table presents details of the Company’s intangible assets as of December 31, 2025 ($ in thousands):
Intangible assets with finite lives:
Intangible assets with indefinite lives:
Acquired in-process technology 1,250 — — 1,250
Favorable license agreement 2,243 — — 2,243
Total intangible assets with indefinite lives 3,493 — — 3,493
The following table presents details of the Company’s intangible assets as of December 31, 2024 ($ in thousands):
Intangible assets with finite lives:
Acquired in-process technology 1,250 — — 1,250
Favorable license agreement 2,257 — — 2,257
Total intangible assets with indefinite lives 3,507 — — 3,507
As of December 31, 2025, 2024 and 2023, other than the $1.7 million intangible asset that was impaired and written off under general and administrative expenses during the year ended December 31, 2025, the Company did not identify any impairment indicators suggesting that the carrying value of the intangible assets was not recoverable.
The following table summarizes the Company's amortization expense of intangible assets (in thousands):
Year Ended December 31,
Cost of patient and digital solutions 610 850 1,039
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The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2025 (in thousands):
Years Ending December 31, Total
Total future amortization expense $ 28,467
7. BALANCE SHEET COMPONENTS
Inventory
Inventory consisted of the following (in thousands):
December 31,
Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
December 31,
Computer and office equipment 1,676 5,650
Less: Accumulated depreciation and amortization (38,851) (36,942)
Depreciation expense was $8.7 million, $7.8 million and $7.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
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Accrued and Other Liabilities
Accrued and other liabilities consisted of the following (in thousands):
December 31,
Refunds reserve 3,500 —
Laboratory processing fees and materials 2,425 3,184
Total accrued and other liabilities $ 41,754 $ 43,352
8. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements in Brisbane, California; West Chester, Pennsylvania; Flowood, Mississippi; Omaha, Nebraska; Fremantle, Australia; and Stockholm, Sweden.
The Company's facility leases expire at various dates through 2033. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
As of December 31, 2025, the carrying value of the ROU asset was $22.8 million. The related current and non-current lease liabilities as of December 31, 2025 were $6.5 million and $19.7 million, respectively. The current and non-current lease liabilities are included in accrued and other liabilities and operating lease liabilities, less current portion, respectively, in the consolidated balance sheets.
The following table summarizes the lease cost for the years ended December 31, (in thousands):
December 31,
Other information:
Weighted-average remaining lease term - Operating leases (in years) 4.02 4.61
Weighted-average discount rate - Operating leases (%) 7.0 % 7.1 %
Supplemental cash flow information related to leases for the years ended December 31, are as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases $ 6,055 $ 5,339 $ 5,454
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Maturities of operating lease liabilities as of December 31, 2025, are as follows (in thousands):
Years ending December 31, Operating Leases
Total lease payments 29,790
Less imputed interest 3,596
Present value of future minimum lease payments 26,194
Less operating lease liability, current portion 6,515
Operating lease liability, long-term portion $ 19,679
As of December 31, 2025, the Company’s leases had remaining terms of 0.41 years to 7.09 years, some of which include options to extend the lease term.
Royalty Commitments
Illumina
On May 4, 2018, the Company entered into a license agreement with Illumina, Inc., or the Illumina Agreement. The Illumina Agreement requires the Company to pay royalties in the mid-single to low-double digits on sales of products covered by the Illumina Agreement.
Other Royalty Commitment
Effective as of August 2023, the Company entered into a license agreement with a university institution, or the University Agreement. The University Agreement requires the Company to pay royalties in the low single digits on sales of products covered by the University Agreement.
Other Commitments
Effective as of July 2023, the Company entered into a license and collaboration agreement with a private entity, or the Collaboration Agreement, pursuant to which the Company was granted an irrevocable, non-transferable right to commercialize its proprietary software, iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation for a period of four years with exclusive rights in the United States. Pursuant to the Collaboration Agreement, the Company will share an agreed-upon percentage of revenue with the private entity, if and when revenues are generated from iBox.
Litigation and Indemnification Obligations
From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements, and (ii) the range of loss can be reasonably estimated.
Natera
In response to the Company’s false advertising suit filed against Natera Inc., or Natera, on April 10, 2019, Natera filed a counterclaim against the Company on February 18, 2020, in the U.S. District Court for the District of Delaware, or the Court, alleging the Company made false and misleading claims about the performance capabilities of AlloSure. The suit seeks injunctive relief and unspecified monetary relief. On September 30, 2020, Natera requested leave of Court to amend its counterclaims to include additional allegations regarding purportedly false claims the Company made with respect to AlloSure, and the Court granted Natera’s request. The trial commenced on March 7, 2022 and concluded on March 14, 2022, with the jury finding that Natera violated the Lanham Act by falsely advertising the scientific performance of its Prospera transplant test
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and awarding the Company $44.9 million in damages, comprised of $21.2 million in compensatory damages and $23.7 million in punitive damages. In July 2023, the Court upheld and reaffirmed the March 2022 jury verdict but did not uphold the monetary damages awarded by the jury. In August 2023, the Court issued an injunction prohibiting Natera from making the claims the jury previously found to be false advertising. Both parties appealed. On October 8, 2024, the U.S. Court of Appeals for the Third Circuit remanded the case to make additional findings. On December 23, 2024, the Court issued an order concluding that there was sufficient evidence to support the jury’s findings of falsity on eight advertisements by Natera. Following the decision, the parties submitted additional briefing to the Court. On August 28, 2025, the U.S. Court of Appeals for the Third Circuit issued a decision affirming the District Court’s findings on both liability and damages. On September 25, 2025, the Company filed a petition for panel rehearing or rehearing en banc of the Court’s damages decision. On October 10, 2025, the Third Circuit denied the petition. On February 9, 2026, the Company filed a petition for Supreme Court review. The Company did not record a receivable or a gain from the judgment as the amount has not yet been realized.
In addition, Natera filed suit against the Company on January 13, 2020, in the Court alleging, among other things, that AlloSure infringes Natera’s U.S. Patent 10,526,658. This case was consolidated with the Company’s patent infringement suit on February 4, 2020. On March 25, 2020, Natera filed an amendment to the suit alleging, among other things, that AlloSure also infringes Natera’s U.S. Patent 10,597,724. The suit seeks a judgment that the Company has infringed Natera’s patents, an order preliminarily and permanently enjoining the Company from any further infringement of such patents and unspecified damages. On May 13, 2022, Natera filed two new complaints alleging that AlloSure infringes Natera’s U.S. Patents 10,655,180 and 11,111,544. These two cases were consolidated with the patent infringement case on June 15, 2022. On May 17, 2022, Natera agreed to dismiss the case alleging infringement of Natera’s U.S. Patent 10,526,658. On July 6, 2022, the Company moved to dismiss the rest of Natera’s claims. On September 6, 2022, the Company withdrew its motion to dismiss. On December 11, 2023, the Court dismissed the case alleging infringement of Natera's U.S. Patent 10,597,724. Natera appealed that decision. On March 13, 2024, the Federal Circuit dismissed Natera's appeal after Natera failed to file its brief and other required papers. On May 30, 2024, Natera filed a second notice of appeal of the dismissal of U.S. Patent 10,597,724. On June 19, 2024, the Company moved to dismiss Natera's appeal. On September 11, 2024, the Federal Circuit denied that motion.
On January 26, 2024, following a five-day trial, a jury concluded that the Company did not infringe Natera's U.S. Patent 10,655,180 but did infringe Natera's U.S. Patent 11,111,544. The jury awarded Natera approximately $96.3 million in damages based on sales of AlloSure and AlloSeq between September 2021 and August 2023. Natera's U.S. Patent 11,111,544 expires in September 2026. Following trial, Natera moved for an injunction on the Company's prior AlloSure process and the parties engaged in motion practice regarding the jury's verdict and discovery as to whether the Company’s current AlloSure process infringes Natera's U.S. Patent 11,111,544. On September 11, 2024, Natera informed the Court that it was abandoning claims of ongoing infringement. On January 3, 2025, the Court issued an order denying Natera’s motion to set aside the jury’s finding that the Company did not infringe Natera's U.S. Patent 10,655,180. On February 24, 2025, the Court issued an order concluding that Natera's U.S. Patents 11,111,544 and 10,655,180 were invalid for lack of written description thereby overturning the jury verdict. On February 25, 2025, the Court issued an order denying Natera's motion for an injunction as moot. Natera has appealed the Court's invalidation of the three patents it asserted against CareDx. The Company intends to defend these matters vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail.
In addition, Natera's U.S. Patent 10,597,724 is currently subject to an ex parte reexamination before the United States Patent and Trademark Office, or PTO. On December 17, 2025, a PTO examiner issued a non-final office action rejecting Claims 1 and 4-6 of the patent. Natera's U.S. Patent 11,111,544 was previously subject to an ex parte reexamination before the PTO. On February 14, 2025, a PTO examiner issued a non-final Office action rejecting Claims 21, 26, and 27 of the patent, the claims CareDx was found to have infringed in the litigation. On July 9, 2025, the PTO issued a reexamination certificate finding that Natera had overcome the prior rejections of the 11,111,544 patent, concluding the reexamination proceeding.
After the jury finding, the Company recognized the damages of $96.3 million as other liabilities on the consolidated balance sheets as of December 31, 2023 as the loss was probable and reasonably estimable at that time. After the Court order overturned the jury finding, the Company derecognized the $96.3 million as of December 31, 2024 as the Company concluded that the loss was no longer probable. It is reasonably possible that the Company may not prevail if Natera continues to pursue the case through appeal, in which case the range of loss could be up to the jury awarded amount of $96.3 million plus potential interest.
United States Department of Justice and United States Securities and Exchange Commission Investigations
As previously disclosed, in 2021, the Company received a civil investigative demand, or CID, from the United States Department of Justice, or DOJ, requesting that the Company produce certain documents in connection with a False Claims Act investigation by the DOJ regarding certain business practices related to the Company’s kidney testing and phlebotomy services, and a subpoena from the United States Securities and Exchange Commission, or the SEC, in relation to an investigation by the SEC in respect of matters similar to those identified in the CID, as well as certain of the Company’s accounting and public reporting practices. By letter dated September 19, 2023, the Company was notified by the staff of the SEC that the SEC has
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concluded its investigation as to the Company and does not intend to recommend an enforcement action by the SEC against the Company. The notice was provided under the guidelines set out in the final paragraph of Securities Act Release No. 5310.
In a court document unsealed on October 7, 2024, the DOJ notified the United States District Court for the Eastern District of New York that it was declining to intervene in a qui tam action filed against the Company by a former employee that served as the basis for the CID. Accordingly, CareDx understands that the DOJ has closed its investigation of the Company with no finding of wrongdoing. On April 8, 2025, the private plaintiff who originally filed the qui tam action in 2021, or the Relator, filed an amended complaint on the public docket. On July 16, 2025, the District Court held a conference, at which it set a briefing schedule for a motion to dismiss. On October 17, 2025, Relator filed an opposition to the Company’s motion to dismiss, and on October 31, 2025, the Company filed its reply in further support of its motion to dismiss. The Company denies the allegations in the qui tam action and intends to vigorously defend itself.
The Company may receive additional requests for information from the DOJ, the SEC, or other regulatory and governmental agencies regarding similar or related subject matters. Although the Company remains committed to compliance with all applicable laws and regulations, it cannot predict the outcome of, or any other requests or investigations that may arise, in the future.
Securities Class Action
On May 23, 2022, Plumbers & Pipefitters Local Union #295 Pension Fund filed a federal securities class action, or the Securities Class Action, in the U.S. District Court for the Northern District of California against the Company, Reginald Seeto, its former President, Chief Executive Officer and member of the Company’s Board of Directors, Ankur Dhingra, its former Chief Financial Officer, Marcel Konrad, its former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting, and Peter Maag, its former President, former Chief Executive Officer, former Chairman of the Company’s Board of Directors and current member of the Company’s Board of Directors. The action alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10b-5 promulgated thereunder. The action also alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company. The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ costs incurred in the lawsuit, including their reasonable attorneys’ and experts’ witness fees and other costs.
On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A. and Robbins Geller Rudman & Dowd LLP as lead counsels. Plaintiffs filed an amended complaint on November 28, 2022. On January 27, 2023, defendants moved to dismiss all claims and to strike certain allegations in the amended complaint.
On May 24, 2023, the court granted the Company’s motion to strike and motion to dismiss, dismissing all claims against defendants with leave to amend. On June 28, 2023, plaintiffs filed a second amended complaint against the Company, Reginald Seeto, Ankur Dhingra, and Peter Maag. Under a briefing schedule ordered by the court on June 12, 2023, defendants’ motion to dismiss and motion to strike the second amended complaint was filed on July 26, 2023, plaintiffs’ opposition was filed on August 30, 2023, and defendants’ reply was filed on September 22, 2023. The court held oral argument on October 31, 2023.
On September 18, 2024, the court granted the Company’s motion to dismiss the second amended complaint without prejudice, providing plaintiffs leave to file a third amended complaint by no later than October 2, 2024 (a deadline which was subsequently extended by stipulation). On October 18, 2024, plaintiffs filed a third amended complaint, which again alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions in violation of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. Among other things, plaintiffs removed former Chief Financial Officer, Ankur Dhingra, as a named defendant. The third amended complaint reiterates many of the same factual allegations as in prior complaints, but purports to add new allegations based on, among other things, a recently unsealed qui tam action filed by a former employee. On November 15, 2024 the defendants filed a motion to dismiss the third amended complaint and on December 13, 2024, plaintiffs filed an opposition brief.On January 10, 2025, defendants filed their reply brief and a hearing was held on January 28, 2025. On February 18, 2025, the court denied the defendant’s motion to dismiss the third amended complaint.
On April 1, 2025, a mediation was held between the parties to the Securities Class Action with the assistance of Phillips ADR Enterprises.
On April 22, 2025, the parties in the Securities Class Action reached an agreement-in-principle to resolve the Securities Class Action under which the Company would pay or cause to be paid a settlement payment of approximately $20.25 million. On May 16, 2025, the parties reached a definitive stipulation of settlement. On May 23, 2025, plaintiffs filed a motion for preliminary approval. On July 23, 2025, the District Court issued an order preliminarily approving the settlement triggering the Company's obligation to fund its portion of the settlement. Pursuant to the settlement agreement, the Company and its insurers each deposited their respective obligations into an escrow account.
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In accordance with the Court’s July 23, 2025 order, plaintiffs filed a motion for final approval and a motion for an award of attorneys’ fees and expenses on September 30, 2025. On December 4, 2025, the Court provided final approval of the settlement and the Company paid the settlement amount.
Derivative Actions
On February 26, 2025, the plaintiffs in a previously-dismissed consolidated derivative action initiated a new action, captioned Edelman v. Bickerstaff, 3:25-c-02036 (N.D. Cal. filed Feb. 26, 2025), purporting to reinstate their claims and updating and amending their prior complaint, or the Edelman Derivative Action.The Edelman Derivative Action asserts claims against the Company as nominal defendant and Drs. Seeto and Maag and Mr. Dhingra, and other current and former members of the Company's Board of Directors alleging, among other things, breaches of fiduciary duty and various state and federal claims based on the factual allegations of the Securities Class Action.
On March 19, 2025, the parties to the Edelman Derivative Action and the Securities Action filed an administrative motion to consider whether the Edelman Derivative Action should be related to the Securities Class Action.On April 1, 2025, the Court granted the motion.
On April 1, 2025, a mediation was held between the parties to the Edelman Derivative Action with the assistance of Phillips ADR Enterprises. No settlement was reached during the mediation.
On April 10, 2025, the Court held an Initial Case Management Conference in the Edelman Derivative Action and thereafter issued a Case Management and Scheduling Order setting a trial date of July 19, 2027, among other deadlines.
On April 21, 2025, plaintiffs in the Edelman Derivative Action submitted a letter motion to the Court seeking to have the Court lift the discovery stay provided by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4, or the PSLRA.On April 23, 2025, CareDx submitted a brief in opposition and a hearing was held on June 10, 2025. On June 12, 2025, the Court issued an order denying plaintiffs’ letter motion to lift the PSLRA’s discovery stay.
On March 20, 2024, Edward W. Burns IRA filed a stockholder derivative action complaint in the Court of Chancery of the State of Delaware against the Company as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of the Company's Board of Directors, or the Burns Derivative Action. Prior to filing the complaint, the Company produced documents to the plaintiff in response to a books and records inspection demand made pursuant to Section 220 of the Delaware General Corporation Law. The plaintiff purports to incorporate those documents in the complaint. The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, unjust enrichment, waste of corporate assets, and aiding and abetting breaches of fiduciary duty. The suit seeks declaratory relief, recovery of alleged damages sustained by the Company as a result of the alleged violations, equitable relief, restitution, and plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’, accountants’, and experts’ fees, costs, and expenses. On April 11, 2024, the Court entered an order staying the Burns Derivative Action pursuant to a stipulation filed by the parties.
On March 10, 2025, the parties to the Burns Derivative Action filed an amended stipulation and proposed order to continue the stay in that action, which was so-ordered by the Court on the same day. On April 1, 2025, a mediation was held between the parties to the Burns Derivative Action with the assistance of Phillips ADR Enterprises. No settlement was reached. On June 9, 2025, in accordance with the Court’s March 10, 2025 order, the parties submitted a joint status report, informing the Court that subject to Court approval, the Securities Class Action has been settled and that settlement discussions in the Burns and Edelman Derivative Actions were ongoing.
On July 22, 2025, the parties reached an agreement in principle to resolve the case, subject to the negotiation of an agreed-upon attorney fee, and informed the Court. On July 31, 2025, the parties submitted a joint status report, notifying the Court that the parties selected a JAMS mediator to oversee attorney’s fee negotiation.
On September 9, 2025, the parties participated in a mediation session to mediate attorneys’ fees which was unsuccessful. On September 11, 2025, the parties in the Edelman Derivative Action submitted a joint status report notifying the Court that because a request for attorneys’ fees is not evaluated at the preliminary approval stage, plaintiffs intended to file a motion for preliminary approval of the derivative settlement.
On September 26, 2025, the parties entered into a stipulation and agreement of compromise, settlement and release resolving and settling, subject to court approval, both the Edelman and Burns Derivative Actions. The same day, plaintiffs in the Edelman Derivative Action filed their unopposed motion for preliminary approval. The deadline to oppose the motion was October 10, 2025 and no opposition was filed. On October 13, 2025, plaintiffs filed a notice of non-opposition, requesting that the Court enter an order granting the motion for preliminary approval without oral argument, which is currently scheduled for December 2, 2025 in the Edelman Derivative Action. The motion for preliminary approval remains under consideration.
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On October 1, 2025 the parties to the Burns Derivative Action filed a third amended stipulation and proposed order to continue the stay in that action through the pendency of a determination on the proposed settlement in the Edelman Derivative Action. The court entered this stipulated order on October 6, 2025.
On December 9, 2025, the Court issued an order preliminarily approving the parties' settlement, subject to resolution of the plaintiffs' request for attorney's fees.
There is no guarantee that the parties will reach a definitive settlement or, if they do, that the settlement will be approved by the Court. In the event there is no settlement, the Company intends to defend itself vigorously. The Company believes that it has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail. The Company has not recorded liabilities for these suits.
9. STOCKHOLDERS' EQUITY
Shelf Registration Statement