CareDx, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: Fourth quarter revenue was $86.6 million, up 32% YOY. Full year 2024 revenue was $334 million, up 19% YOY. Adjusted EBITDA was $27.8 million for the full year, compared to a loss of $38 million in 2023. Generated $22 million in cash from operations in Q4 and ended the year with $261 million in cash and no debt.
• Accomplishments in Q4: Expanded AlloMap Heart coverage from month 6 to month 2 post-transplant for 21 million commercial lives and added 12.2 million new commercial covered lives for AlloSure. Patient and digital solutions revenue grew 18% YOY. Test volumes in testing services grew 14% YOY in Q4, sixth consecutive quarter of sequential growth.
• Investments and Coverage: Added 30 sales and marketing team members and 20 billing team members. Continued progress in payer coverage, with 28 million lives added/expanded for AlloMap Heart and 36 million new commercial covered lives for AlloSure in 2024.
• Synergies and New Products: Strong synergy between patient/digital solutions and testing services. Intends to launch new products in 2025, including AlloSure Heart for pediatric patients, AlloSure Kidney for simultaneous pancreas and kidney transplant patients, and HistoMap Kidney assay; expand AlloView AI risk prediction model; and launch new software in lab products.

Segment Performance

• Testing Services: Fourth quarter revenue was $63.8 million, up 37% year-over-year. Full year 2024 testing services revenue was $249.4 million, up 19% year-over-year. Delivered approximately 45,500 tests in the fourth quarter, up 14% from prior year, with volume growth across all organs (heart, kidney, lung).
• Patient and Digital Solutions: Fourth quarter revenue was approximately $11.4 million, representing 18% year-over-year growth. Full year 2024 revenue was $43.6 million, up 18% year-over-year. Strong synergies with testing services offerings; when accounts use 3 or more CareDx patient and digital solutions, there's a 50% greater new patient capture rate for testing services.
• Lab Products: Fourth quarter revenue was $11.4 million, up 23% year-over-year. Full year 2024 revenue was $40.8 million, up 22% year-over-year. Driven by sales of AlloSeq Tx NGS-based HLA typing kits for organ recipients.

Guidance

• 2025 revenue expected to be in the range of $365 million to $375 million.
• Adjusted EBITDA gain for 2025 expected to be between $29 million and $33 million.
• Testing services volume expected to grow mid-teens YOY, with ASP approximately $1,360 blended for full year. Patient and digital solutions and lab products revenue expected to grow mid-teens YOY.
• Non-GAAP gross margin expected to be approximately 70% for full year 2025; operating expenses expected to be approximately $235 million, up 11% YOY.

Risks

• Litigation: Patent litigation case reversal may be appealed, but the company reversed a $96 million accrued liability in 2024 financial statements. However, IP litigation remains a potential risk.
• Market Adoption: Challenges in fully realizing revenue growth from new products and coverage expansions, as market adoption of new testing services and products may take time.
• Operational Challenges: Risks in revenue cycle management and ensuring timely collection of receivables, as well as potential issues in scaling operations profitably.

Q: Can you update on protocols and surveillance volume?

A: Saw movement in surveillance volume with kidney outpacing other organs. Centers initiating protocols see ramp-up in volume with newly transplanted patients, but some volume also comes from centers without protocols where clinicians believe in the test's impact.

Q: Details on pharmacy management and hematopoietic stem cell study?

A: Pharmacy management includes digital tools like text reminders and a specialty pharmacy MTM program. The hematopoietic stem cell study has a 1-year interim readout, with a 2-year follow-up, and the product launch is anticipated closer to trial conclusion.

Q: Thoughts on xenotransplantation partnerships?

A: CareDx has partnerships in xenotransplantation, with a product used in nearly all xenotransplants to date, partnering with companies developing modified organs and transplant centers performing procedures.