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CareDx Q2 Revenues Up 76 Percent

NEW YORK – CareDx reported after the close of the market on Thursday that its second quarter revenues rose 76 percent year over year, thanks largely to an 84 percent increase in testing services revenues.

For the three months ended June 30, the molecular diagnostics company reported total revenues of $31.5 million, up from $17.8 million during the same period a year earlier, and beating the average Wall Street estimate of $28.0 million.

Testing services revenues rose to $25.7 million from $14.0 million in the prior-year quarter, and product revenues rose 28 percent to $4.6 million from $3.6 million in Q2 2018. Digital and other revenues rose 334 percent to $1.2 million from $276,000.

"The CareDx team continues to execute at a high level, delivering another consecutive record quarter," CareDx CEO Peter Maag said in a statement. "During the quarter, we announced the next generation in kidney transplantation surveillance, KidneyCare, a multimodality test combining next-generation sequencing, gene expression, and smart analytical tools, bringing precision medicine to transplantation and widening CareDx's competitive moat. Our results highlight the momentum in our business, and we are optimally positioned for continued growth in 2019 and beyond."

On a conference call with analysts following the release of the earnings, Maag noted that the company officially unveiled KidneyCare at the recent American Transplant Congress, adding that CareDx saw a "noticeable uptick" in volumes for its AlloSure blood-based, donor-derived, cell-free DNA test for organ transplant rejection following the event.

CareDx said it returned 7,355 AlloSure results to 5,548 kidney transplant patients during Q2, and that it provided 4,572 AlloMap heart transplant test results, an increase of 11 percent year over year. On the call, Maag said that 117 transplant centers provided AlloSure results to their patients during Q2, and that the firm has provided AlloSure results to more than 10,000 patients — about 5 percent of the total number of living kidney transplant patients in the US — since the test was launched in October 2017.

"We estimate these 117 centers account for approximately 65 percent of the transplant volume in the United States," he added. "Demand for AlloSure remains broad and includes both patients who recently received a kidney transplant as well as patients that received their allograft in previous years."

Maag also said that the AlloSure surveillance patient attrition rate continues to be in the 10 percent range, and that the majority of the firm's AlloSure patient results come from patients outside of registry studies. CareDx finished Q2 with 4,628 AlloSure surveillance patients, with surveillance patients being defined as patients that are managed by CareDx on a predefined transplant center testing protocol. The 10 percent attrition rate is defined by the 373 surveillance patients who had standing orders that expired during the quarter and that had been not renewed by the end of the quarter.

The overall reimbursement rate for the test in Q2 was also consistent with previous quarters, with 70 percent to 80 percent of AlloSure volume attributed to Medicare patients, Maag added.

For AlloMap, the uptick in testing volumes is due to growth in underlying heart transplant testing and to the adoption of the company's HeartCare test, which combines AlloMap and AlloSure-Heart, Maag said.

Growth in the firm's product revenues in Q2 was driven by continued traction of its TruSight HLA and QType products, Maag said.

"We remain on track to fortify our product offerings with the introduction of new AlloSeq next-generation sequencing products in 2019: AlloSeq TX for HLA typing, AlloSeq cell-free DNA kits for solid organ transplants, and AlloSeq HCT for bone marrow transplantation," he added.

CareDx also has begun to report a new revenue line in addition to testing and products — digital, with that "revenue primarily coming from our recent acquisition [of OTTR]," Maag said. "With the closing of the OTTR acquisition, CareDx has broadened its footprint. The transaction closed in early May, with the eight weeks under the CareDx umbrella generating $1.1 million in revenues for the quarter."

Approximately 50 percent of the digital business is based on recurring revenues, with the remainder being services and one-time license fees, he added. The non-recurring revenue will be uneven on a quarter-by-quarter basis, depending on the timing of implementation of the OTTR patient tracking software system at transplant centers.

"The digital team will continue to focus on serving transplant centers with the OTTR suite of software solutions. In addition, we will enhance the workflow solutions for AlloMap and AlloSure in centers with OTTR software," Maag said. "The team will also spearhead our efforts to create a patient engagement platform. And finally, the team will bring our multi-modality testing solutions and a machine-learning algorithm to the transplant clinic."

The firm's Q2 net loss narrowed to $7.8 million, or $.19 per share, from $14.1 million, or $.40 per share, in Q2 2018. On an adjusted basis, the company broke even in Q2, meeting analysts' expectations.

CareDx's Q2 R&D costs rose 117 percent to $7.6 million from $3.5 million in the year-ago quarter, and its SG&A expenses rose 66 percent to $19.1 million from $11.5 million.

The company ended the quarter with $43.5 million in cash and cash equivalents, and $255,000 in restricted cash.

CareDx increased its revenue guidance for the full year and now expects revenues of $123 million to $125 million for 2019. The company had previously anticipated revenues of $113 million to $115 million. Analysts' consensus expectation is for revenues of $115.2 million for FY 2019.

In a note to investors, Piper Jaffray's William Quirk said CareDx remains his top small cap pick, and raised the price target for the firm's shares to $63 from $50. "AlloSure continues to lead overall performance, but with AlloMap growing double digits and the HLA reagents starting to ramp, the overall company is executing well," he wrote. "Accordingly, we are raising our forward estimates and have higher confidence in our long term projections."

CareDx shares rose nearly 3 percent to $34.89 in Friday morning trading on the Nasdaq.