Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CareDx Inc (NASDAQ:CDNA) reported a strong first quarter with a revenue increase of 18% year over year, reaching $84.7 million.
• The company achieved its seventh consecutive quarter of sequential testing volume growth, with testing services revenue up 15% year over year.
• CareDx Inc (NASDAQ:CDNA) ended the quarter with a robust cash balance of $231 million and no debt, providing financial stability.
• The company launched two expanded indications for Allosure, enhancing its product offerings for pediatric heart transplant patients and simultaneous pancreas kidney transplant patients.
• CareDx Inc (NASDAQ:CDNA) made significant strides in market access, adding 3.5 million new covered lives for Allomap PAP and 15.5 million for Allosure testing.

Negative Points

• Operating expenses increased, driven by investments in sales and marketing, which may impact profitability if not managed carefully.
• The company faced a $1.1 million write-off for aged receivables, indicating potential challenges in collections.
• CareDx Inc (NASDAQ:CDNA) is involved in a securities class action litigation, with an anticipated out-of-pocket expense of approximately $5.4 million.
• There was a muted start to the year in transplant procedures, which could impact future revenue growth if not addressed.
• The company anticipates a $5 million annual investment for the Epic integration, which could strain resources if not offset by increased efficiencies.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with CDNA.

Q: Did you see signs of surveillance volume starting to come back in the quarter, and where are we at in that process? A: John Hanna, CEO: Absolutely, we are seeing signs of that volume coming back. We made progress on surveillance testing protocols in the 4th quarter and in the 1st quarter, and we see surveillance testing and kidney volumes really leading our growth across all organs.

Q: How should we be thinking about the rate of spend throughout the rest of the year, given the higher R&D and SGA expenses this quarter? A: Abhishek Jane, CFO: Operating expenses were up 6% year over year, but with revenue growth of 18%, this provides about 600 to 700 basis points improvement in operating expenses as a percent of revenue. The increase is primarily driven by sales and marketing investments, while R&D expenses remain flat.

Q: Is the benefit of surveillance volumes getting pulled forward, or is it still expected in the back half of the year? A: John Hanna, CEO: We are not suggesting a pull forward. We anticipated some impact from weather and fires at the beginning of the quarter, but we are making progress on surveillance testing. We expect growth in Q2 as centers reinitiate protocols and gradually increase volumes.

Q: What are your thoughts on the potential issuance of new LCDs for transplant testing by the MACs? A: John Hanna, CEO: The data supporting surveillance testing has grown significantly. We saw a press release from the agency in August about potential new LCDs, but we don't have a timeline. We continue to push forward with studies like the KOR study to solidify the position for coverage.

Q: Can you discuss the impact of the new CPT code for Allosure and how it leads to greater in-network coverage and higher ASP per test? A: John Hanna, CEO: The new Allosure-specific code allows us to contract with third-party payers and get in-network, which facilitates first-pass claim payments at contracted rates. This should help convert coverage policies into contracts, improving ASPs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.