Executive Summary / Key Takeaways

• Market Leadership and Strategic Focus: CareDx is a leading precision medicine company in transplant diagnostics, offering end-to-end solutions across the pre- and post-transplant journey. Its "solution selling" strategy integrates testing services, digital tools, and patient support to drive growth and deepen customer loyalty.
• Robust Financial Performance and Outlook: The company achieved record revenue of $100.1 million in Q3 2025, a 21% year-over-year increase, and significantly raised its full-year 2025 revenue guidance to $372 million to $376 million. Adjusted EBITDA guidance was also increased to $35 million to $39 million, reflecting strong operational execution.
• Technological Innovation Driving Value: Recent launches like HistoMap Kidney, an AI-driven AlloSure Plus, and next-generation HLA typing solutions (AlloSeq Tx11, Score 7.0) underscore CareDx's commitment to advanced diagnostics, offering more precise and actionable insights for clinicians and patients.
• Operational Excellence and Cash Generation: Significant improvements in Revenue Cycle Management (RCM) through automation and AI have led to record cash collections, a 38% improvement in DSOs, and a 1,300 basis point reduction in claims rejection rate in Q3 2025. The company maintains a strong liquidity position with $194.2 million in cash and no debt as of September 30, 2025.
• Regulatory and Competitive Landscape: While facing potential reimbursement headwinds from a new draft LCD policy and ongoing litigation, CareDx's extensive evidence generation and strategic market access efforts aim to solidify coverage and maintain its competitive edge against rivals in the evolving diagnostics market.

Advancing Transplant Care Through Integrated Solutions

CareDx, Inc. (NASDAQ:CDNA) stands as a pivotal force in precision medicine, dedicated to enhancing the lives of transplant patients and their caregivers. The company's mission is to create life-changing solutions that enable transplant patients to thrive, a commitment reflected in its comprehensive suite of diagnostic tests, digital tools, and patient support services that span the entire transplant journey. This end-to-end approach positions CareDx as a leader in a specialized, yet growing, segment of the healthcare industry.

The transplant diagnostics market, while niche, is critical, with over 100,000 individuals on national organ transplant waitlists. CareDx's strategy is rooted in "solution selling," aiming to integrate its offerings to drive growth in testing services, foster customer loyalty, and strengthen its brand equity. This approach is particularly relevant given the ongoing Organ Procurement and Transplant Network (OPTN) modernization initiative, a multiyear effort by the U.S. Department of Health and Human Services to improve data collection, reporting, and organ allocation. CareDx's digital solutions team, in collaboration with Leidos (LDOS), was awarded a contract to bid on projects related to this initiative, leveraging its deep expertise in transplant software, data science, and AI.

CareDx's history, dating back to its incorporation in 1998 as XDx, Inc., has been marked by continuous innovation. The company achieved a significant milestone in August 2008 with the 510k clearance for AlloMap Heart, a gene expression profiling solution for heart transplant patients. This laid the groundwork for its expansion into donor-derived cell-free DNA (dd-cfDNA) testing with AlloSure Kidney, which gained Medicare coverage in October 2017. Strategic partnerships, such as the 2018 license agreement with Illumina (ILMN) for NGS products like AlloSeq Tx, AlloSeq cfDNA, and AlloSeq HCT, have further bolstered its technological capabilities and market reach.

Technological Edge and Innovation Pipeline

CareDx's core competitive advantage lies in its clinically differentiated, high-value diagnostic technologies. These include AlloSure Kidney, AlloMap Heart, AlloSure Heart, HeartCare (the combined use of AlloMap Heart and AlloSure Heart), and AlloSure Lung. These tests provide genomics-based information for transplant patients, offering non-invasive surveillance for organ rejection. For instance, AlloMap Heart, an FDA-cleared gene expression profiling test, is used by over 90% of U.S. heart transplant centers and has been utilized over 150,000 times in nearly 30,000 patients. It assesses immune system activity, with lower scores indicating a quiescent allograft, and has a high negative predictive value (NPV) for ruling out rejection. The Invasive Monitoring Attenuation through Gene Expression (IMAGE) study demonstrated that GEP-based rejection monitoring is non-inferior to routine biopsies for composite outcomes and showed similar overall survival at two years.

The company's commitment to innovation is evident in its robust pipeline and recent product launches. AlloSure Plus, an AI-driven diagnostic, integrates AlloSure results with standard-of-care measures like serum creatinine and proteinuria to deliver a personalized risk score of rejection. This platform, previously known as AlloView, is designed to improve detection of graft rejection by combining real-time clinical data automatically pulled from Electronic Medical Records (EMRs), reducing clinician burden and enabling timely interventions. AlloSure Plus was validated in a large, international, multicenter study involving over 2,700 renal transplant biopsies, demonstrating improved sensitivity and specificity for detecting rejection, including microvascular inflammation.

CareDx also recently launched HistoMap Kidney at ASN Kidney Week 2025, a breakthrough tissue-based molecular test that integrates advanced histopathology with molecular insights. This test leverages gene expression profiling for deeper insights into immune activity and rejection phenotypes, providing a precise molecular readout from biopsy tissue to confirm subtyping rejection from FFPE samples. HistoMap Kidney is expected to be available in early 2026 for clinical study and later for commercial use, addressing a critical unmet need for clarity on rejection type when kidney function declines post-transplant. This innovation is particularly valuable as new anti-CD38 therapies for antibody-mediated rejection emerge, allowing clinicians to genomically subtype rejection prior to treatment.

In pre-transplant diagnostics, CareDx introduced AlloSeq Tx11 at ASHI 2025, a next-generation HLA typing solution with enhanced Class II coverage and expanded non-HLA markers to support broader transplant organ profiling. This solution is designed for flexibility, working with low-quality samples, preventing allele dropouts, and reducing the need for retesting. The company also launched Score 7.0, a modernized analysis software for QType, built for scalability and regulatory alignment, supporting future ABO typing and IVDR compliance. AlloSeq Tx and QType have received IVDR certification in the European Union, underscoring the company's commitment to high-quality, regulatory-compliant solutions. CareDx also validated a rapid ABO genotyping assay, demonstrating 100% concordance with established methods, which enables faster, more accurate blood group determination by integrating ABO and HLA genotyping into a single workflow. These technological advancements strengthen CareDx's competitive moat by providing superior accuracy, earlier detection, and more comprehensive insights, which can lead to improved patient outcomes and potentially higher average selling prices (ASPs) and market share.

Competitive Landscape and Strategic Positioning

CareDx operates in a highly competitive and rapidly evolving diagnostics market. Its primary competitors in molecular diagnostics for post-transplant surveillance include Natera (NTRA), Eurofins, Oncocyte (OCX), and Verici (VRCI). Other companies, such as Thermo Fisher (TMO), Devyser, Bio-Rad (BIO), and EuroBio, are also entering the market with kitted products. In pre-transplant typing, QTYPE competes with quantitative PCR products from companies like Thermo Fisher and next-generation sequencing (NGS) typing products. For patient and digital solutions, competition comes from various healthcare software developers, hospital-affiliated pharmacies, specialty pharmacies, and Epic's transplant application, Phoenix.

CareDx differentiates itself through its specialized focus on transplantation, offering an integrated, end-to-end ecosystem for transplant patients. While competitors like Natera have broader portfolios spanning oncology and reproductive health, CareDx's deep expertise and tailored solutions for transplant care provide a distinct advantage in this niche market. The company's emphasis on patient-centric solutions, including mobile apps like AlloCare and medication therapy management programs, enhances user engagement and loyalty, an area where more generalized diagnostic providers may lag.

CareDx's strategy to provide solutions across the care continuum, from pre-transplant matching to post-transplant monitoring, allows it to build stronger relationships with transplant centers. The company's "solution selling" approach, where patient and digital solutions like XynQAPI (which now includes an IOTA program performance composite score calculation) drive growth for testing services, is a key differentiator. This integrated approach helps unlock growth opportunities for testing services, deepen customer loyalty, and strengthen brand equity.

Despite the competitive pressures, CareDx's continuous evidence generation, such as the landmark KOAR and SHORE studies, is crucial for expanding payer coverage and clinician adoption. These studies demonstrate the clinical utility of CareDx's tests in improving patient health outcomes, which is vital for maintaining and increasing reimbursement rates. The company's new AlloSure CPT code, active from April 1, 2025, is expected to facilitate greater in-network coverage and improve payment rates by enabling direct contracts with payers, reducing denials, and accelerating cash collections.

Financial Performance and Operational Excellence

CareDx has demonstrated a strong financial turnaround, achieving record performance in Q3 2025. Total revenue reached $100.1 million, marking a 21% increase year-over-year. This growth was broad-based, with all three business segments—Testing Services, Product Revenue, and Patient and Digital Solutions—generating record quarterly revenue. For the nine months ended September 30, 2025, total revenue was $271.4 million, up 10% from the same period in 2024.

Testing Services revenue in Q3 2025 grew 19% year-over-year to $72.2 million, driven by a 13% increase in test volume, reaching approximately 50,300 tests. The revenue per test increased by 5% to $1,436, notably including $5.9 million from cash collections exceeding receivables on historical claims, a direct result of improved revenue cycle management. Patient and Digital Solutions revenue surged 30% year-over-year to $15.4 million in Q3 2025, primarily due to increased adoption of the CareDx pharmacy and growth in digital solutions. Product revenue also saw a significant increase of 22% to $12.5 million, fueled by higher sales of NGS-based kitted solutions.

Profitability has shown marked improvement. Gross profit reached a high watermark of $70.9 million in Q3 2025, with a gross margin of 70.9%, a 190 basis point improvement year-over-year. This expansion was attributed to strong top-line performance and disciplined input costs. Non-GAAP operating expenses declined to 58% of revenue in Q3 2025, down from 63% in the prior year, demonstrating significant operating leverage. Adjusted EBITDA more than doubled year-over-year to $15.3 million in Q3 2025. For the full year 2024, CareDx reported $333.8 million in revenue, a 19% increase year-over-year, and an adjusted EBITDA gain of $27.8 million, a substantial turnaround from a $38 million loss in 2023.

Liquidity remains strong, with $194.2 million in cash, cash equivalents, and marketable securities as of September 30, 2025, and no outstanding debt. The company's operational excellence initiatives, particularly in Revenue Cycle Management (RCM), have yielded impressive results. Record cash collections of approximately $90 million from testing services in Q3 2025 led to a $19 million sequential reduction in accounts receivable and a 38% improvement in Days Sales Outstanding (DSOs), from 71 to 44 days. Further RCM improvements include an over 200% improvement in total appeals volume, a 60% improvement in claims submission time, a 600 basis point improvement in overall 0 pays, and a 1,300 basis point reduction in claims rejection rate in Q3 2025.

CareDx is also making significant strides in its enterprise infrastructure. The company is actively integrating EPIC Aura, a key initiative to simplify ordering and results delivery for healthcare providers. Eight EPIC Aura transplant center connection projects are currently in process, with Boston Children's, a leading pediatric heart transplant program, already live. This integration has resulted in a 20% reduction in order turnaround time and a 60% reduction in specimen holds. CareDx anticipates approximately 10% of its total volume will be serviced through EPIC Aura integrations by year-end 2025, growing to roughly 50% by year-end 2026.

Outlook and Growth Catalysts

CareDx has raised its full-year 2025 revenue guidance to $372 million to $376 million, reflecting strong Q3 2025 performance. The adjusted EBITDA guidance for the full year was also increased to $35 million to $39 million. This updated guidance implies Q4 2025 revenue of $101 million to $105 million, with testing volume expected to range between 52,000 and 54,000 tests. The Q4 2025 revenue per test is projected to be $1,400 to $1,420, inclusive of $4 million to $6 million from collections in excess of receivables. The company reiterates its long-range plan to achieve $500 million in revenue and 20% adjusted EBITDA by 2027.

Key growth catalysts include the continued adoption of surveillance testing, particularly for kidney transplants, driven by the IOTA program, which began in July 2025. This program incentivizes transplant centers to increase kidney transplant volumes and organ acceptance rates, potentially leading to a greater need for regular monitoring with AlloSure Kidney. CareDx's XynQAPI software, designed to help centers monitor their IOTA performance in real-time, further supports this initiative. The launch of new products, such as AlloSure Heart for pediatric patients and AlloSure Kidney for simultaneous pancreas-kidney transplant patients, expands the company's addressable market in high-acuity conditions.

Evidence generation remains a critical strategic pillar. The publication of the first manuscript from the landmark KOAR study in the American Journal of Transplantation in Q2 2025, demonstrating AlloSure Kidney's clinical utility in enhancing rejection management, is expected to bolster payer coverage and clinician adoption. Similarly, the second SHORE registry study, published in October 2025, validates HeartCare as a noninvasive, clinically proven approach for heart transplant surveillance, showing high specificity for diagnosing antibody-mediated rejection. These studies, along with ongoing R&D for AlloHeme in hematologic malignancies, provide a strong foundation for future growth and market penetration.

Risks and Challenges

Despite its strong performance and strategic initiatives, CareDx faces several risks. The company has a history of substantial net losses and an accumulated deficit of $719 million as of September 30, 2025, and anticipates incurring net losses for the next several years. A significant portion of its revenue (48% of testing services revenue in Q3 2025) is derived from Medicare, making it vulnerable to changes in reimbursement policies. The new CPT code (PLA Code 0540U) for AlloSure Kidney, Heart, and Lung tests, effective January 1, 2026, subjects them to a repricing process, with CareDx's recommended pricing implying an 88% decrease for AlloSure Kidney compared to current rates. A new draft LCD policy, released in July 2025, could introduce new coverage criteria, utilization limitations, and bundled payments, potentially leading to lower reimbursement rates.

CareDx is also involved in ongoing litigation with Natera, which appealed a court order invalidating Natera's patents that CareDx was previously found to have infringed. While CareDx believes it has strong defenses, the outcome of litigation is unpredictable. The company has also identified a material weakness in its internal control over financial reporting as of September 30, 2025, related to risk assessment and control activities for complex transactions. While remediation efforts are underway, failure to fully address this could impact financial reporting accuracy and timeliness. Macroeconomic factors, including "media turmoil around transplantation" and its dampening effect on kidney transplant volumes, also present challenges.

Conclusion

CareDx is a leader in transplant diagnostics, strategically positioned to capitalize on the growing demand for precision medicine in organ transplantation. The company's "solution selling" approach, underpinned by a robust pipeline of innovative diagnostic technologies like AlloSure Plus and HistoMap Kidney, is driving significant revenue growth and operational efficiencies. Its commitment to evidence generation and market access, coupled with disciplined financial management and a strong liquidity position, provides a compelling investment narrative.

While potential reimbursement changes and ongoing litigation present notable risks, CareDx's proactive measures in RCM, EPIC Aura integration, and continuous product development demonstrate a clear path toward sustainable, profitable growth. The company's ability to leverage its specialized expertise and integrated offerings to improve patient outcomes and clinician workflows solidifies its competitive standing and supports its long-term financial targets.