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CareDx Q3 Revenues Slip 2 Percent

NEW YORK (GenomeWeb) – CareDx reported after the close of the market on Thursday that its third quarter revenues fell 2 percent mostly due to a 5 percent dip in revenues from its non-invasive heart transplant rejection test AlloMap.

For the three months ended Sept. 30, the firm reported total revenues of $12.2 million, down from $12.5 million in Q3 2016, but beating the average Wall Street estimate for revenues of $12.1 million.

"With our core products performing well, we have a strong platform in place to grow CareDx's business in 2018 and beyond. We are excited to have had a successful AlloSure launch ahead of our original timeline, representing a transformational business opportunity for CareDx while meeting the needs of kidney transplant patients across the US," CareDx President and CEO Peter Maag said in a statement. "Additionally, our recent successful follow-on offering provides increased financial flexibility as we continue our drive towards profitability in 2018."

Testing revenues from AlloMap fell to $8.2 million from $8.6 million a year earlier, though US testing volume rose 7 percent year over year. Product revenues from Olerup-branded HLA typing kits rose slightly to $3.9 million from $3.8 million in the year-ago period. Collaboration and license revenues climbed to $155,000 from $108,000 the year before.

The firm noted that revenue recognized in Q3 2016 included $900,000 related to a catch-up of cash collections from prior periods. On a conference call with analysts following the release of the earnings, CareDx CFO Mike Bell said that excluding this $900,000, AlloMap revenues for the quarter would have increased 6 percent, roughly in line with the increase in testing volume.

CareDx also launched its AlloSure cfDNA-based organ transplant diagnostic test during the quarter with reimbursement from the Centers for Medicare and Medicaid Services at $2,840.75 per test and 14 US transplant centers providing AlloSure testing to patients in October.

On the call, Maag said the high reimbursement rate is a recognition of AlloSure's clinical validity, and noted that Medicare coverage of AlloSure means that about 80 percent of kidney transplant patients will now be covered for the test, a feat that most companies take years to achieve, if they ever do. Further, he added, this 80 percent of kidney transplants takes place in about 100 transplant centers in the US, which gives CareDx a highly concentrated market to focus on. And the company already has relationships with many of these centers through their use of AlloMap, so CareDx is well positioned to continue those relationships through AlloSure, Maag said.

He also said that the company has already started to receive payments from Medicare administrator Noridian for patients who have gotten tested with AlloSure since October 9.

As for reimbursement for AlloMap, Maag said the Medicare reimbursement rate for the test is set to increase to $3,240 on Jan. 1, 2018, due to the Protecting Access to Medicare Act. He noted that Medicare patients make up about 40 percent of AlloMap's total patients.

Maag also pointed to the recent CMS 14-day rule change that will now allow molecular diagnostics labs to directly bill CMS when tests are ordered within two weeks of an outpatient's discharge from the hospital as a positive opportunity for CareDx. The change will allow patients easier access to AlloMap and AlloSure, he said, calling it a "huge patient convenience factor."

The company's Q3 net loss widened to $14.3 million, or $.63 per share, from $3.8 million, or $.26 per share, in Q3 2016. On an adjusted basis, CareDx reported a net loss of $.15 per share, beating analysts' consensus estimate for a loss of $.17 per share. Its Q3 net loss included charges totaling $9.2 million for changes in the estimated fair value of warrant and derivative liabilities, and contingent consideration, the firm added.

CareDx's Q3 R&D costs were essentially flat year over year at $3 million, while its SG&A expenses for the quarter fell 16 percent to $7.3 million from $8.7 million a year earlier.

The company ended the quarter with $6.0 million in cash and cash equivalents.

For full-year 2017, CareDx expects revenues to be in the range of $47 million to $49 million, excluding any potential revenues from AlloSure. Analysts are expecting 2017 sales of $47.7 million. Bell also noted on the call that the company is on the road to profitability and aspires to bring in revenues of $90 million to $100 million in 2019. The company is also considering all its options for future diagnostics development using cell-free DNA testing — cfDNA "is a 10-organ opportunity," Maag said. Further, AlloSure sales outside the US is "a significant opportunity" that could be achieved by turning the test into a kit and selling it through the company's Olerup channels, he added. However, Maag cautioned, the company hasn't detailed that strategy as of yet, and is currently concentrating on the launch of AlloSure and maximizing its revenues.