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CareDx Q2 Revenues Grow 9 Percent but Miss Estimates as Firm Lowers Full-Year Guidance 

NEW YORK – CareDx missed analyst estimates on both the top and bottom lines in the second quarter and lowered its full-year revenue guidance despite an overall growth in Q2 test volume, citing challenges related to reimbursement lags and customers changing from Medicare to Medicare Advantage. 

The Brisbane, California-based firm reported after market close Thursday that growth in test services drove total Q2 revenues to rise 9 percent to $80.6 million from $74.2 million in Q2 of last year, falling shy of analysts' average forecast of $81.9 million. 

"Our testing services volume grew roughly 6 percent sequentially and 20 percent year over year to deliver over 45,000 tests," Reg Seeto, president and CEO of CareDx, said in an after-market conference call with investors. "With these 45,000 tests," he added, "we passed a major milestone when CareDx delivered more than 500,000 patient test results across heart, kidney, and lung patients." 

Testing services revenue grew 3 percent to $67.1 million from $64.9 million a year ago, while product revenue dipped 3 percent to $6.7 million from $6.9 million. 

"Our strong testing volume growth came despite a tough comparison from Q2 '21," Abhishek Jain, the firm's interim CFO, said on the call. "That was an all-time high quarter for transplant volumes." 

Seeto said the company sees continued momentum for its tests, particularly AlloSure Lung, citing over 1,400 tests ordered in Q2 and being used in 60 percent of lung centers. He also commented that the company remains in discussion with CMS over reimbursement for AlloSure Lung. 

"Achieving reimbursement coverage is critical," he said. 

The company reported a Q2 net loss of approximately $21.7 million, or $.41 per share, compared to a net loss of $1.9 million, or $.04 per share in the same period last year. On an adjusted basis, CareDx reported a loss per share of $.13, below analysts’ average expectation of $.11. 

CareDx lowered its full-year revenue guidance to between $325 million and $335 million from prior guidance of $330 million to $350 million, citing the impacts of a higher-than-expected mix of commercial patients with a lag in reimbursement, and the "increasing complexity" of collections caused by patients shifting from Medicare to Medicare Advantage. 

Seeto said that the company continues to scale its internal billing infrastructure and has added third party billing providers "to add extra horsepower because of the influx of new Medicare Advantage and commercial plans." 

"In the longer term," Seeto said, "the strong uptake of our offerings provides a longer runway for sustained growth." 

He added that the company sees "multiple drivers" in the organ transplant market, which carries the potential to double the number of transplant volumes being conducted. These include government initiatives, an increase in living donors, the use of discarded organs, improvements in organ perfusion and transport technologies, and the potential for alternative organ supplies like xenotransplant. 

The firm’s Q2 SG&A expenses ballooned 45 percent to $52.2 million from $35.9 million a year ago, which Jain attributed in part to a "conference-heavy quarter." CareDx’s Q2 R&D spending grew 19 percent to $22.6 million from $19.0 million a year ago. 

"We remain disciplined with our spend and plan to keep operating expenses flattish in the second half," Jain said. 

CareDx ended the quarter with $166.8 million in cash and cash equivalents, and $139.4 million in marketable securities. 

In Friday morning trading on the Nasdaq, shares of CareDx were down a fraction of a percent at $24.13. 

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